Asset turnover is a KPI that shows how efficiently a company uses its total assets to generate revenue. In other words, it shows how many times the company’s assets are “turned over” through the year’s sales.
Formel
Asset turnover is calculated as follows:
Asset turnover = Revenue / Aktiver
Here, the average of the company’s assets over the period is typically used to give the most accurate picture.
Interpretation
- En high inventory turnover shows that the company is good at using its assets to generate sales.
- En low inventory turnover may indicate that the company has too many assets relative to revenue, or that the assets are not being used efficiently.
Eksempel
A company has annual revenue of DKK 20m and average assets of DKK 10m:
Asset turnover = 20,000,000 / 10,000,000 = 2.0
This means the company’s assets turn over twice in a year.
Anvendelse
The key figure is used by investors, banks and management to assess operational efficiency. It should always be compared with industry benchmarks, as capital-intensive industries (e.g. manufacturing and transport) naturally have lower asset turnover than service businesses.