Friday, 4 January 2019

Total Assets Turnover Ratio

Total Assets Turnover Ratio

The ratio of Total assets turnover or Total Asset Turnover Ratio is the ratio of the activity (the ratio of efficiency) that measures the company's ability to generate sales from total assets by comparing the net sales by average total assets.

While the sense of rotation of the Assets according to the Dictionary of Bank Indonesia is the ratio to measure the ability of the company's assets to earn income; faster spinning company assets grew the company's revenues. In other words, this ratio indicates how efficiently a company can use its assets to generate sales. Total assets turnover is also often called also with Turnover Total Assets (Total Active Turnover) or simply called by the Turnover of assets (Asset Turnover).

Formula (Total Asset Turnover Ratio)

It is calculate with a distributing net sales (Net Sales) with the average amount of assets. The following is the formula the ratio Total Assets Turnover (Total Asset Turnover Ratio).

The ratio Total Assets Turnover = sales/average Total assets

Note: average Total assets is usually calculated by adding the balance of the assets of the beginning and end is then divided into two so that it Formula can also be written as below:

The ratio Total assets Turnover = sales/ ((beginning of the year total assets total assets + end of year)/2)

Example Cases

A company that manufactures calculator sales reported a white garment is $ 100 million. Total assets at the beginning of the year amounted to $ 100 million while total assets at the end of the year is $ 200 million. What is the ratio of total assets turnover or Total Asset Turnover Ratio on the company?


= Net sales of $ 100 million.
(1) Total assets beginning of year = $ 100 million.
(2) Total assets year end = $ 200 million.
(3) Total assets Turnover Ratio =?


The ratio Total assets Turnover = sales/((beginning of the year total assets total assets + end of year)/2) the ratio of

(1) Turnover Ratio = $ 100 million,-/(($ 100 million,-+ USD 200 million,-)/2)
(2) Ratio = $ 100 million,-/USD. 150 million.

T.A.T.R = 0.6 times.

So the ratio of the Total Turnover of the company's assets was 0.6 times.

Assessment Ratio Total Assets Turnover (Total Asset Turnover Ratio)

As previously mentioned, the asset turnover ratio is used to how efficient a company uses its assets to generate sales. This means that the higher the ratio, the more efficient the company uses its assets to generate sales. Asset Turnover Ratio instead of low indicates less efficient management in the use of its assets and is most likely a problem of management or production.

A value of 1 in this ratio means the sale of the white garment is equal to average total assets in that year, in other words, the company has produced 1 the dollar selling on every dollar invested in assets.

Keep in mind that, just as the ratio-the ratio of other financial analysis, Asset Turnover Ratio also varies in each industry. There are industries that are able to manage and use its assets with highly efficient, there are also certain industries which cannot use it efficiently. Therefore, this asset turnover Ratio should be used to compare the industry engaged in the same field.

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