Asset Turnover Ratio

Asset Turnover Ratio (ATR) This is a great measure to use to help assess the effectiveness of a business to generate cash/sales from its asset investments. Look for an increase over time. Generally, a figure greater than 1 (preferably a lot greater) is advantageous and shows that a company has generally invested wisely in its capital investments. If this measure declines over time, it is worth understanding where the decline is coming from. For instance, if Return on Assets is also falling, it is worth questioning whether the decline is coming from a reduction in profit margins or a change in asset turnover – or even a combination of the two.