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 assets and  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 invested wisely in its capital investments. If this measure declines over time, it is worth investigating 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.

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Definition used:

Your ATR is derived by:

Total Income divided by Total Assets

Your ATR can be improved in a number of ways, including:

• Increase your revenues without a similar increase in your asset base
• Invest in newer technology which promises to produce greater process efficiencies and higher revenues