A good ratio for asset turnover depends on the industry in which the company operates. Some industries, such as retail and manufacturing, generally require a higher asset turnover ratio compared to others.
Generally, a higher asset turnover ratio is considered better as it indicates that the company is efficiently using its assets to generate sales. However, a very high asset turnover ratio could mean that the company is relying heavily on its assets to generate sales and may not be investing enough in the business for long-term growth.
A good asset turnover ratio also depends on the company’s historical performance and the performance of its peers in the industry. It’s essential to compare the asset turnover ratio with the industry average and competitors to determine whether the ratio is good or bad.
In summary, what is considered a good ratio for asset turnover depends on the industry, the company’s historical performance, and the performance of its peers. It’s always best to look at the ratio in context and not solely rely on a single number to assess a company’s financial health.