Given that the company had average total assets of $907,000, gross sales were $1,087,000 and its net sales were $990,000. the company's total asset turnover equals 1.09.
In accounting, asset turnover refers to a ratio that measures the value of a company's revenues relative to the value of its assets. It is used as an indicator of the efficiency with which a company is using its assets to generate revenue.
The higher the ratio of asset turnover , the more efficient a company is at generating revenue from its assets. However, when a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.
The Asset Turnover ratio:
= $990,000 / $907,000
= 1.09
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