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Asset Turnover Ratio
/ˈæs.ɛt ˈtɜːn.oʊ.vər ˈreɪ.ʃi.oʊ/noun
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The asset turnover ratio is a key financial metric that measures how efficiently a company uses its assets to generate sales revenue, typically calculated by dividing net sales by average total assets. This ratio provides insights into operational effectiveness and resource management, making it essential for investors to spot underperformers in dynamic markets where agility can make or break success.
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Surprisingly, high asset turnover ratios have been linked to long-term success, as seen with retail giant Walmart, which consistently maintains a ratio above 2.5, generating over $2.50 in sales per dollar of assets annually since the 1990s, helping it dominate global markets.
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