Asset Turnover Ratio
Revenue divided by total assets, measuring how much sales the asset base generates.
Formula
Asset Turnover = Revenue / Average Total Assets
Unit
ratio (x, times)
In depth
Asset turnover describes the business model: retailers and distributors run high turnover on thin margins, while utilities and infrastructure run very low turnover on thick ones, and neither is better. Multiplied by net margin it gives return on assets, which is why the DuPont decomposition treats the two as a trade-off. A falling ratio during a capacity expansion is normal and temporary; a falling ratio without expansion means assets are becoming less productive. Old fully depreciated assets inflate the ratio, so a company with a young asset base is penalised by the comparison.
Worked example
Revenue ₹1,000 crore on average total assets of ₹1,200 crore gives asset turnover of 0.83. With a 9% net margin, return on assets is 0.83 x 9% = 7.5% — the two components multiply.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Asset Turnover Ratio” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.