How is the asset turnover ratio calculated?

The asset turnover ratio is calculated by dividing revenue by total assets. This ratio measures how efficiently a company is using its assets to generate sales. A higher asset turnover ratio indicates that the company is effectively using its assets to produce revenue, which is a positive sign of operational efficiency.

This ratio provides valuable insight into a company's asset management and operational performance. It allows stakeholders to assess how well the company is utilizing its assets in relation to its sales volume. In contrast, the other choices do not accurately represent the asset turnover ratio's definition or formula. For instance, total assets divided by total liabilities measures leverage rather than asset efficiency, while operating income divided by assets assesses profitability versus total assets. Net profit divided by equity pertains to return on equity, which also does not relate to how well assets generate revenue.