Differences in the amounts of assets necessary to generate a dollar of sales cause asset turnover ratios

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Differences in the amounts of assets necessary to generate a dollar of sales cause asset turnover ratios to vary among industries. For example, a steel company needs a greater number of dollars in assets to produce a dollar in sales than does a grocery store chain. Also, profit margins and turnover ratios may vary due to differences in the amount of expenses incurred to produce sales. For example, one would expect a grocery store chain to spend more per dollar of sales than does a steel company. Often, a large turnover will be associated with a low profit margin, and vice versa.

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Financial Management Theory And Practice

ISBN: 9780324259681

11th Edition

Authors: Eugene F Brigham, Michael C Ehrhardt

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