Does the data in the above table mean anything to you? Wal-Mart going back to January 2009. Well, if none of these ring a bell, by the forex broker inc leverage definition of this study, you will understand the significance of the total asset turnover ratio. This equation is a basic formula for measuring how efficiently a company is operating.
While this article does a lovely job of displaying how the total asset turnover can impact a company’s stock price, if you really want more information around how to calcualte the total asset turnover and some working examples, please visit total asset turnover examples. Now that we have redirected all of the hardcore mathematicians, let’s resume our breakdown of the total asset turnover ratio. The sales represents all the revenue generated by the company and is disclosed on a company’s income statement. The total assets represent the assets listed on the company’s balance sheet.
The higher the ratio of sales to total assets, the better. While this article does a lovely job of displaying how the total asset turnover can impact a company’s stock price, if you really want more information around how to calcualte the total asset turnover formula and some working examples, please visit total asset turnover examples. This number is reported quarterly and can give an insight on whether a company is becoming more efficient at their core competencies over time. There is no set number that represents a good total asset turnover value because every industry has varying business models.
Based on what we know so far regarding total asset turnover, what conclusions can we draw from the above graph? Stating that the blue line is above the red line isn’t enough. 2009, Wal-Mart was able to match this growth. Why do Investors Care About the Total Asset Turnover? What makes the total asset turnover a unique financial ratio is that it provides an investor some indication of the competitiveness in the market, as well as how efficiently a company is utilizing its assets to generate new sales. For example, let’s say that the industry standard total asset turnover ratio for steel producing companies is . A fictitious company, Blue Steel has a total asset turnover ratio of 1.
The average investor at this point would probably pass on HGSI and call it a day. But we have to dig further. Why did HGSI’s revenues drop so abruptly? Why is the total asset turnover much smaller than its competitors? Now this process for Ford was painful.