Total Asset Turnover Definition and Explanation

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Quick Definition

Gauges a company’s ability in generating sales revenue from all of its investments made in the company.

Explanation of Total Asset Turnover

The Total Asset Turnover is similar to Fixed Asset Turnover, which both measures a company’s effectiveness in generating sales revenue from investments back into the company. Total Asset Turnover evaluates the efficiency of managing all of the company’s assets.

Importance of Total Asset Turnover

The higher the Total Asset Turnover is, the more effective use of the company’s investments Total Assets have become. Total Asset Turnover can be very useful if you watch what actually makes up the Total Assets of the company. A company with low Inventories and strict credit policies to keep Accounts Receivable low will help the Total Asset Turnover look even better. Of course it depends on all of the company’s Total Assets.