 The asset turnover ratio measures how efficiently a company uses its assets to generate sales revenue. Asset turnover is a measure of efficiency. The formula is net sales revenue divided by average total assets. The average total assets is calculated by taking the beginning total assets plus the ending total assets and dividing by two. Sometimes you might see a question where only ending total assets are given. In that case just use that number but realize that in the real world you would be able to find two years worth of data. This is another ratio where the higher the number the better. Here's an income statement from our sample company. We'll use the highlighted sales revenue to determine asset turnover. Here's the asset section of the balance sheet. We'll use the highlighted asset, total assets to determine asset turnover. So for 2016 net sales divided by average total assets gives us an asset turnover of 7.07. This means that for every $1 invested in assets the company is generating over $7 of sales revenue. Sometimes this is expressed as times meaning 7 times the amount of revenue as assets. You will see this ratio again if you study the Dupont analysis.