asset turnover ratio

Definition

Indicates how successful a firm is in utilizing its assets in generation of sales revenue. A high ratio is considered desirable, but what is considered high in one industry may be low for another. Asset turnover ratios are computed for specific assets, such as 'cash to sales' (cash ÷ sales revenue), 'inventory to sales' (value of inventory ÷ sales revenue), 'fixed assets to sales' (fixed assets ÷ sales revenue). When computed as total 'assets-to-sales' ratio (total assets ÷ sales revenue), it is called capital intensity.