Asset Turnover Ratio

The Asset Turnover Ratio measures how efficiently a company uses its total asset base to generate revenue. It is calculated as: Asset Turnover = Net Revenue ÷ Average Total Assets. A higher ratio indicates that a company is generating more sales per rupee of assets deployed — a sign of capital efficiency. Asset-light businesses like IT services, FMCG, and financial intermediaries typically have high asset turnover ratios, while capital-intensive sectors like steel, cement, and utilities naturally have lower ratios due to the large fixed asset base required. The Asset Turnover Ratio is one of the three components of the DuPont analysis framework, alongside net profit margin and financial leverage, collectively explaining a company's Return on Equity (ROE).