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Asset turnover

A measurement of how many pounds worth of sales a business generates from the assets employed within the business. It is calculated by dividing the revenue (turnover) of the business into the figure for net assets and is expressed as number of times. For example, if the revenue (turnover) of a business in a particular year was £1 million and the net assets employed (at the time of the balance sheet) amounted to £0.5 million, then the asset turnover figure would be 2 times. This would mean that for every £1 of money invested in assets, £2 of revenue is being generated. Obviously the higher the asset turnover figure, the better the business is performing. Judgement as to whether the figure is good or bad cannot be made without comparing the figure to previous years or businesses operating within the same industry.

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