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Ratios: Total Asset Turnover definitions Flashcards

Ratios: Total Asset Turnover definitions
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  • Total Asset Turnover
    Efficiency metric showing how many dollars of net sales are generated for each dollar of average total assets.
  • Net Sales
    Top line figure on the income statement representing total revenue from sales after returns and allowances.
  • Average Total Assets
    Mean value of total assets over a period, calculated by adding beginning and ending balances and dividing by two.
  • Efficiency
    Degree to which assets are utilized to maximize net sales output relative to asset investment.
  • Income Statement
    Financial report summarizing revenues and expenses, with net sales typically appearing at the top.
  • Numerator
    Component of a ratio formula that appears above the division line, representing net sales in this context.
  • Denominator
    Component of a ratio formula that appears below the division line, representing average total assets here.
  • Benchmarking
    Process of comparing a company's ratio to competitors or industry averages to assess relative performance.
  • Industry Average
    Standardized value representing the typical ratio result within a specific sector for comparison purposes.
  • Asset Requirements
    Level and type of assets necessary for operations, varying significantly across different industries.
  • Order of Operations
    Sequence in which calculations are performed to ensure accurate computation of ratios and averages.
  • Turnover Ratio
    Financial metric assessing how effectively a resource, such as assets, is converted into sales or revenue.
  • Competitors
    Other firms within the same industry used as reference points for performance comparison.
  • Sales per Dollar of Assets
    Amount of net sales generated for each dollar invested in total assets, indicating operational effectiveness.