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Asset turnover ratio
- The asset turnover ratio is calculated by dividing sales over average total assets and measures the efficiency with which a company uses its assets to generate revenue. No single ratio should be used in isolation when evaluating a business.
Example: $AMZN
- Since FY17 $AMZN turnover ratio declined, though it is more appropriate to look at the trend from FY20 onwards, given the changes in accounting standards (lease capitalization). In general, we observe a decline across the board, except AWS which is relatively constant.
- One of the flows of the asset turnover ratio is a deflated ratio in a given year when a company invests significantly in anticipation of high growth phase & vice versa. AWS ratio is an exception as efficiency is maintained over the years despite being a high growth segment.
- Next week we will release our $AMZN in-depth analysis. Subscribe to receive it in your inbox. 👇
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