The asset turnover ratio measures a company's efficiency in using its assets to generate revenue. These assets include all current assets, long-term investments, non-current assets, and intangible assets. The formula for calculating the asset turnover ratio is as follows:
Asset Turnover = Net Sales Revenue / Average Total Assets
A low asset turnover ratio might indicate that there are obsolete inventory, outstanding accounts receivables, or unproductive use of capital assets such as property, plant, and equipment (PP&E).