The asset turnover ratio is a measure of a company's efficiency in generating revenue from its owned resources. It is calculated by dividing net sales by average total assets. This ratio can be used to determine whether a company is able to justify holding a large number of assets on its balance sheet. A high asset turnover ratio indicates that the company is effectively utilizing its assets to generate sales, while a lower ratio may suggest inefficiency. The formula for calculating the ratio is: Asset Turnover ratio = Total Revenue / Average Assets.