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Total Asset Turnover

April 13, 2006

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The ratio of total sales (on your income statement) to total assets (on your balance sheet) indicates how well you're using all your business assets (rather than just inventories or fixed assets) to generate revenue.

A high asset turnover ratio means a higher return on assets, which can compensate for a low profit margin. In computing the ratio, you might compute total assets by averaging the total assets at the beginning and end of the accounting period.

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