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Total Debt Ratio Formula
The efficient use of assets is important for the profitability of any organization. Inventory, accounts receivable, cash and equipment’s main functions are to create revenue. Not utilizing assets to their maximum efficiency translates into lower revenue. Naturally lower revenue is synonymous with lower profits. Turnover ratio indicates how efficiently assets are used to produce revenue.
Total Asset Turnover Ratio Calculation
The calculation uses two factors, total revenue and average assets to determine the turnover ratio. When calculating for a particular year, the total revenue for that year is used. Instead of using the year ending asset total from the balance sheet, a more accurate picture would be to use the total average assets for the year.