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Sales to total assets ratio definition

Description

Sales to total assets (S/TA) ratio shows how much sales are generated per one dollar of assets, or in other words, how effectively the company uses its’ assets. Data to calculate this ratio is collected from the income statement and the balance sheet.

This ratio is important to both the owners and the investors, as it indicates how effectively the company’s assets are being managed.

Norms and limitations

There are no general norms for this ratio.

The higher value of the ratio, the better it is for the company. It is recommended to compare this ratio to those of the companies, working within the same industry.

Formula

Net sales (revenues, sales) can be described as sales, deducting returns and discount for customers.

Assets (Total assets) – mean every asset that the company owns and that is shown on the balance sheet. Total assets equals total liabilities + owner’s equity.