Revenue generated per dollar of total assets. Measures how efficiently a company uses its assets. Part of both DuPont analysis and the Piotroski F-Score. Retail businesses typically have high asset turnover.
Formula
Description
Measures how efficiently a company uses its assets to generate revenue. It is one of the three components of DuPont analysis and a criterion in the Piotroski F-Score (improving asset turnover earns one point). Higher ratios indicate better asset utilization.
Interpretation
Above 0.7 is generally good. Retail businesses typically have very high asset turnover while capital-intensive industries (utilities, manufacturing) have lower ratios. The trend matters more than the absolute level.
Related Integrity Indicators
Operating cash flow divided by total debt. Measures how quickly a company could repay all its debt from operating cash flow alone. Above 0.5 means the company could theoretically pay off all debt in two years from operations. Below 0.15 signals heavy debt relative to cash generation.
Free cash flow divided by net income. Above 1.0 means the company generates more cash than its reported profits, a hallmark of high-quality earnings. Consistently below 0.7 is a red flag.
Compares operating cash flow to net income. When cash flow exceeds earnings, the company's profits are well-supported by actual cash. This is one of the nine criteria in the Piotroski F-Score.
What percentage of revenue must be reinvested in capital assets. Below 8% is capital-light and attractive. Buffett prefers businesses that don't require large ongoing capital outlays to maintain their competitive position.
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