ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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TOTAL ASSET TURNOVER Definition
TOTAL ASSET TURNOVER measures managements efficiency in managing all of a firm's assets - specifically the generation of revenues from the firms total investments in assets. This ratio is extremely important in high asset firms such as manufactures and telecommunications companies. Generally, the higher this ratio as compared to like companies or the industry (Formula: Net Revenue / Total Assets):
- the smaller the investment required to generate sales, thus the more profitable the firm.
- indicates the firm has less money tied up in fixed assets for each dollar of sales revenue.
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LEVERAGE is property rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage relative to the underlying stock because a price change in the stock may result in a relatively large increase or decrease in the value of the option. In general, in finance, leverage is the use of debt financing. Leverage, within a corporation, is the use of borrowed money to increase the return on investment. For leverage to be positive, the rate of return on the investment must be higher than the cost of the money borrowed.
RPI, among many others, can be Retail Price Index, Real Property Inventory, Rapid Process Improvement, or Responsive Production Inventory.