Asset Turnover

Explanation: Asset turnover is a financial metric that assesses the efficiency with which a company utilizes its assets to generate sales revenue. It measures the company’s ability to generate income from its investments in assets such as equipment, property, and inventory. A higher asset turnover ratio indicates that the company is more effective at converting its assets into revenue, which is generally favorable for investors as it suggests better operational efficiency and utilization of resources.

Example: TCS’s asset turnover of 1.62 indicates that for every rupee invested in assets, the company generates approximately 1.62 rupees in revenue. This means that TCS is effectively utilizing its assets to generate sales. For instance, if TCS invests 100 rupees in assets, it earns around 162 rupees in revenue from those assets. A higher asset turnover ratio, such as TCS’s, is indicative of strong operational performance and efficient use of resources, which can contribute to sustained growth and profitability.

You can view the Asset Turnover for any company on Radar under DuPont Analysis in the Ratios section.