Asset Turnover Rate

Asset Turnover Rate is a measure of management's ability to use assets to produce sales.  When calculating the turnover rate, the assets not contributing directly to sales, such as long-term investment or loans made to officers of the company, should be excluded from the calculation.

The calculation of asset turnover is as follows:

Sales / Average Assets (used to produce sales)

A higher value of asset turnover suggests that management is making better use of assets, which could translate into a higher rate of return on total assets.