Explain How to Calculate Total Asset Turnover

question 79

Essay

Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

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Definitions:

Comparative Advantage

An economic principle stating that countries or entities gain and benefit from trade when they specialize in producing goods for which they have a lower opportunity cost than their trading partners.

Production

The process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output).

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive in the market.

Consumer Surplus

The gap between the price consumers are ready to offer for a good or service and the effective amount they spend on it.