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What is a good asset turnover ratio?
An asset turnover ratio of 2.5 or more is considered good. This is true for a company in the retail sector, while a company in the utility sector might aim for an asset turnover ratio of between 0.25 and 0.5.
Asset turnover ratio is a kind of efficiency ratio that evaluates and measures the value of a business or company's sales revenue relative to the value of the organization's assets.
Here is the formula to calculate an asset turnover ratio:
Total Asset Turnover = Net Sales / Total Assets
The higher a company's asset turnover ratio is, the better it is performing in terms of generating revenue from its assets.
It is important to remember that the asset turnover ratio can vary considerably, depending on the industry a company is in. What can be considered a good asset turnover ratio in one industry, might be considered bad in another.
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