Asset turnover ratio
In one sentenceNet sales divided by average total assets, showing how many riyals of sales each riyal invested in assets generates.
Simply put
This ratio measures how well you use your assets: the shop, equipment, inventory and receivables. A higher ratio means more sales from the same assets.
Stores and supermarkets have a high ratio because their margins are small and their turnover is fast, while factories have a lower one. That is why it is read with the profit margin: the two together make up the return on assets.
Worked example
A supermarket made net sales of 3,000,000 SAR in the year, and its average assets are 1,500,000 SAR.
Net sales3,000,000 SAR
Average total assets1,500,000 SAR
Ratio = 3,000,000 ÷ 1,500,0002 times
Formula: Net sales ÷ average total assets
Don't confuse it with
Inventory turnoverInventory turnover divides cost of sales by inventory alone, and asset turnover divides sales by all assets.