Asset Turnover Ratio

Asset turnover is the efficiency term in the DuPont split of ROE. A low-margin business can still earn a decent return if it turns its assets quickly. A high-margin business can afford to turn them slowly.

It punishes idle assets and rewards a light model.

Rising turnover means more sales from the same assets, which is operating leverage in its helpful form, until capacity runs out.

A recent revaluation, a large goodwill balance, or a pile of surplus cash lowers turnover without any change in the factory. Use tangible operating assets if you want the operating picture.