The total asset turnover ratio indicates the relationship of net sales for a specified year to the average amount of total assets during the same 12 months.

Let’s assume that during the year 2007 a corporation had net sales of $2,100,000 and its total assets during the same 12 month period averaged $1,400,000. The company’s total asset turnover for 2007 was 1.5 (net sales of $2,100,000 divided by $1,400,000 of average total assets).

This ratio will vary by industry, as some industries are more capital intensive than others. Always compare your company’s financial ratios to the ratios of other companies in the same industry.

Download our Total Assets Turnover Ratio Form and Template.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

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