What is my asset turnover ratio? Efficiency ratios are a great way of analysing the underlying operational efficiency of a business. Jazoodle assesses the efficiency of a company in a number of ways. Areas such as client revenue collection, or how effective its employees are in generating revenues and keeping costs at reasonable levels.
Asset turnover ratio (ATR)
How do you measure the efficiency of people and processes within your organisation? The asset turnover time is a great way of doing this, and an indicator of company efficiency. Assess this over time and compare periods. In Jazoodle, we assess and compare ATT across financial years as well as on an individual monthly basis.
What does it mean?
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.
Check your asset turnover ratio with Jazoodle now
How do we derive your ATR?
Your ATR is derived by:
Total Income divided by Total Assets
How Can I Improve my ATR?
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