--- title: Asset Turnover | Formula, Calculator and Example description: The asset turnover ratio is a way to measure the value of a company’s sales compared to the value of the company’s assets. --- [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo-white.4f6047d4.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo.53b28bee.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) **[Home](https://www.carboncollectiveinvesting.com/) > [Sustainable Investing](https://www.carboncollectiveinvesting.com/sustainable-investing) >** Asset Turnover # Asset Turnover ![](https://www.carboncollectiveinvesting.com/hubfs/Brooke%20Tomasetti.png) Written by Brooke Tomasetti | Reviewed by [Subject Matter Experts](https://www.carboncollectiveinvesting.com/subject-matter-experts) Updated on October 1, 2024 Fact Checked Why Trust Carbon Collective? ### Table of Contents The asset turnover ratio is a way to measure the value of a company’s sales compared to the value of the company’s assets. It’s an efficiency ratio that lets you see how efficiently the company uses its assets to generate revenue. The asset turnover ratio is expressed as a number instead of a percentage so that it can easily be used to compare companies in the same industry. So, for example, if a company had an asset turnover ratio of 3, this means that each dollar of assets generates $3 of revenue. This means that the higher the asset turnover ratio, the more efficient the company is. If the company has a low asset turnover ratio this indicates they are not using assets efficiently to generate sales. ## Asset Turnover Ratio Formula ![1-Apr-23-2022-05-50-51-02-AM](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/1-Apr-23-2022-05-50-51-02-AM.png?width=1457&name=1-Apr-23-2022-05-50-51-02-AM.png) To calculate the asset turnover ratio for a company, divide the net sales by its average total assets. The formula uses net sales from the company income statement, which means that product refunds, sales discounts and sales allowances must be deducted from total sales to measure the true ratio. To work out the average total assets you add the value of the assets at the beginning of the year to the value of assets at the end of the year and divide the result by two. This simple two-year balance sheet is average, but some companies prefer to use the more in-depth [weighted average calculation](https://www.carboncollectiveinvesting.com/sustainable-investing/weighted-average/) which assigns average costs to each piece of inventory sold in a given year. ## Asset Turnover Ratio Example Brandon’s Bread Company has been in the confectionery business for years. The company wants to expand its operations, and they have been looking for an angel investor. They have a meeting with one this year who has requested to know how well Brandon’s utilizes the company assets to produce sales. The following information was extracted from Brandon’s income statement for the year that ended in July 2019: - Beginning assets: $70,000 - Ending Assets: $120,000 - Net Sales: $25,000 You can calculate Brandon’s Bread Company's total assets turnover ratio by dividing its net sales by average total sales. ![2-Apr-23-2022-05-51-26-30-AM](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/2-Apr-23-2022-05-51-26-30-AM.png?width=1455&name=2-Apr-23-2022-05-51-26-30-AM.png) ![3-Apr-23-2022-05-51-36-09-AM](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/3-Apr-23-2022-05-51-36-09-AM.png?width=1456&name=3-Apr-23-2022-05-51-36-09-AM.png) A ratio of 0.26 means that Brandon’s generates 26 cents for every dollar worth of assets. This low asset turnover ratio could mean that the company is not utilizing its assets to their full potential which is a risk factor for an investor. ## Asset Turnover Ratio Analysis Companies calculate this ratio on an annual basis, and higher asset turnover ratios are preferred by investors and creditors compared to lower ones.  If a company has an asset turnover ratio of 5 it would mean that each $1 of assets is generating $5 worth of revenue. This is favorable because it is a sign that the company is using its assets efficiently. It’s important to note that the asset turnover ratio is based on industry standards and some industries are likely to have better ratios than others. So to be able to use the asset turnover ratio effectively it needs to be compared to other companies in the same industry. Asset intensive industries like airports, rail, mining, etc will have a lower ratio because they have more value in their assets which will lower the ratio. On the opposite side, some industries like finance and digital will have very few assets, and their asset turnover ratio will be much higher. The [ratio can be used as part of a broader analysis](https://www.carboncollectiveinvesting.com/sustainable-investing/ratio-analysis/) of a company, but it does have its limitations: - It only provides meaningful analysis in asset-heavy industries and isn’t very useful in service-based industries or those with few assets - Some companies will outsource assets, which reduces the asset base and gives a higher ratio - Companies can sell off assets in preparation for a decline in growth to artificially inflate the ratio ## Asset Turnover Ratio Conclusion The Asset Turnover Ratio provides a comparison between the net sales and the average assets of a business or company with a higher ratio implying utilization of the company assets in production and vice versa.  The following points are a recap of the entire article. - Asset turnover ratio measures how well a company will be able to combine all its assets to produce sales or revenues in a given year - The efficiency ratio compares a company’s net sales with average total sales. - Asset turnover ratio is expressed as a numeric and not as a percentage. - Using this ratio to compare companies in the same industry will be preferable to compare companies across industries. - Assets intensive industries will register a higher ratio than brain driven service industries. - Higher asset turnover ratio is favorable as it is an indication that a company is making good use of its assets. - A low asset turnover ratio indicates inefficiency in production. - The ratio provides insights to creditors as well as investors on the wellbeing of a company. ## Asset Turnover Ratio Calculator You can use the asset turnover ratio calculator below to work out your own ratios for comparison with other companies in your industry.   Net Sales Beginning Assets Ending Assets Asset Turnover Ratio ## FAQs ### 1. What is the asset turnover ratio? The asset turnover ratio is a measure of how well a company uses its assets to generate sales or revenue. It compares the net sales with the average total assets of a business. A higher ratio implies that the company is utilizing its assets more efficiently in production. On the other hand, a lower ratio indicates inefficiency. ### 2. What is a good asset turnover? There is no definitive answer as to what a good asset turnover ratio is. It depends on the industry that the company is in, and even then, it can vary from company to company. Generally speaking, a higher ratio is better as it implies that the company is making good use of its assets. ### 3. How do you calculate asset turnover? The asset turnover ratio is calculated by dividing the net sales by the average total assets. The result is expressed as a numeric value. ### 4. Is high asset turnover good or bad? There is no definitive answer as to whether high or low asset turnover is good or bad. It depends on the industry and the company itself. However, a higher ratio is generally seen as better as it implies that the company is making good use of its assets. A lower ratio, on the other hand, may indicate inefficiency. ### 5. What causes asset turnover to increase?  There are several reasons why the asset turnover ratio may increase. One is if the company has more sales relative to its assets. Another is if the company sells off some of its assets, thereby reducing the average assets. Finally, if the company outsources some of its assets, it will also have a higher ratio. ### Related Topics - [Sustainable 401(k) Plan](https://www.carboncollective.co/401k) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing/) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Retirement Glossary](https://www.carboncollective.co/sustainable-investing/retirement-planning-glossary) - [Best Retirement Plans](https://www.carboncollective.co/sustainable-investing/the-10-best-retirement-plans) - [Wealth Manager Vs Financial Advisor](https://www.carboncollective.co/sustainable-investing/wealth-manager-vs.-financial-advisor) ![Attend Our Next Webinar](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-webinar.12af7b6e.svg) ### Attend Our Next Webinar Join our next Sustainable Investing 101 webinar, get our favorite DIY options, and walk through how we build our portfolios. [Watch Now](https://www.carboncollective.co/sustainable-investing-webinar-green-retirement-month) ![Get Our Newsletter](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-demo.6ed28722.svg) ### Get Our Newsletter Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Join Newsletter ![close-typeform](data:image/gif;base64,R0lGODlhEQARAIAAAODn7P///yH5BAEHAAEALAAAAAARABEAAAIqBIKpab3v3EMyVHWtWZluf0za0XFNKDJfCq5i5JpomdUxqKLQVmInqyoAADs=) ![Talk To A Human](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-chat.49d48c5b.svg) ### Talk To A Human Joining a new investment service can be intimidating. We’re here for you. Click below to email us a question or book a quick call. [Ask a Question](https://ask.carboncollective.co/f70pooobq) Topics ## Sustainable Investing Topics View our list of some topics below. See More - Portfolios - [Performance](https://www.carboncollectiveinvesting.com/returns) - About - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - Learn - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - Contact - [Contact us](mailto:hello@carboncollective.co) - [Legal](https://www.carboncollective.co/legal) - [Privacy Policy](https://www.carboncollectiveinvesting.com/hubfs/2022-11%20Carbon%20Collective%20Privacy%20Policy.pdf) - [Back to top](https://www.carboncollectiveinvesting.com/sustainable-investing/asset-turnover#top-of-page) DISCLAIMERS: Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective"), an SEC-registered investment adviser. A copy of Carbon Collective's current written disclosure statement discussing Carbon Collective’s business operations, services, and fees is available at the SEC’s investment adviser public information website – [www.adviserinfo.sec.gov](https://adviserinfo.sec.gov/firm/summary/310129) or [our legal documents here](https://blog.carboncollective.co/legal-documents/). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. Carbon Collective does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Carbon Collective’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Carbon Collective's charges and expenses. Carbon Collective's internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form CRS, Form ADV Part 2 and other disclosures. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Carbon Collective is not registered. © 2026 Carbon Collective Corporation. All rights reserved. × #### Fact Checked Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Our team of reviewers are established professionals with years of experience in areas of personal finance and climate. They have contributed to top tier financial publications, such as Reuters, Axios, Ag Funder News, Bloomberg, Marketwatch, Yahoo! Finance, and many others. This team of experts helps Carbon Collective maintain the highest level of accuracy and professionalism possible. × #### Why Trust Carbon Collective Carbon Collective is the first online investment advisor 100% focused on solving climate change. We believe that sustainable investing is not just an important climate solution, but a smart way to invest. We follow ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Much of our research comes from leading organizations in the climate space, such as Project Drawdown and the International Energy Agency (IEA). Our goal is to deliver the most understandable and comprehensive explanations of climate and finance topics. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including MarketWatch, Bloomberg, Axios, TechCrunch, Forbes, NerdWallet, GreenBiz, Reuters, and many others. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions. } ```json { "@context" : "https://schema.org", "@type" : "Organization", "alternateName" : "Carbon Collective", "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "en", "contactType" : "customer service", "telephone" : "(650) 868-2697" }, "logo" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png", "name" : "Carbon Collective Investing LLC", "sameAs" : [ "https://www.facebook.com/carboncollectiveinvesting/", "https://twitter.com/carbncollective", "https://www.instagram.com/carbon.collective/", "https://www.youtube.com/channel/UC769Y-F-L_B37kyQfdpvyXA", "https://www.linkedin.com/company/carbon-collective/", "https://www.crunchbase.com/organization/carbon-collective", "https://adviserinfo.sec.gov/firm/summary/310129", "https://www.wikidata.org/wiki/Q110243690" ], "url" : "https://www.carboncollective.co/" } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The asset turnover ratio is a measure of how well a company uses its assets to generate sales or revenue. It compares the net sales with the average total assets of a business. A higher ratio implies that the company is utilizing its assets more efficiently in production. On the other hand, a lower ratio indicates inefficiency." }, "name" : "What is the asset turnover ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "There is no definitive answer as to what a good asset turnover ratio is. It depends on the industry that the company is in, and even then, it can vary from company to company. Generally speaking, a higher ratio is better as it implies that the company is making good use of its assets." }, "name" : "What is a good asset turnover?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The asset turnover ratio is calculated by dividing the net sales by the average total assets. The result is expressed as a numeric value." }, "name" : "How do you calculate asset turnover?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "There is no definitive answer as to whether high or low asset turnover is good or bad. It depends on the industry and the company itself. However, a higher ratio is generally seen as better as it implies that the company is making good use of its assets. A lower ratio, on the other hand, may indicate inefficiency." }, "name" : "Is high asset turnover good or bad?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "There are several reasons why the asset turnover ratio may increase. One is if the company has more sales relative to its assets. Another is if the company sells off some of its assets, thereby reducing the average assets. Finally, if the company outsources some of its assets, it will also have a higher ratio." }, "name" : "What causes asset turnover to increase?" } ] } ``` ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Brooke%20Tomasetti.png", "url" : "https://www.carboncollectiveinvesting.com/sustainable-investing/author/brooke-tomasetti" }, "dateModified" : "2024-10-01", "datePublished" : "2021-03-24", "description" : "The asset turnover ratio is a way to measure the value of a company’s sales compared to the value of the company’s assets.", "headline" : "Asset Turnover | Formula, Calculator and Example", "image" : "", "mainEntityOfPage" : { "@id" : "https://www.carboncollectiveinvesting.com/sustainable-investing/asset-turnover", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png" }, "name" : "Carbon Collective" } } ```