The total asset turnover ratio is net sales divided by average total assets. The fixed charge coverage ratio is earnings before fixed charges and taxes divided by Fixed Charges. Return on investment is net income divided by average total assets. The total asset turnover ratio multiplied by the fixed charge coverage ratio would not equal return on investment.
The total asset turnover ratio is net sales divided by average total assets. The average collection period, or days sales in receivables, is the number of days an average receivable is outstanding before it is collected. Return on investment is net income divided by average total assets. The total asset turnover ratio multiplied by the average collection period would not equal return on investment.
The total asset turnover ratio is net sales divided by average total assets. The debt ratio is total debt divided by total assets. Return on investment is net income divided by average total assets. The total asset turnover ratio multiplied by the debt ratio would not equal return on investment.
Return on investment is calculated as the net income of the company divided by the average total assets: ROI = Net Income Average Total Assets The profit margin is calculated as net income divided by net sales: Profit Margin = Net Income Net Sales Total asset turnover is calculated as net sales divided by average total assets: Asset Turnover = Net Sales Average Total Assets Putting all of the formulas together, if we multiply the total asset turnover by the profit margin we get: Net Sales × Net Income Average Total Assets Net Sales The Net Sales in the numerator of the first ratio and the denominator of the second ratio cancel each other out, and we are left with the formula for return on investment: Net Income Average Total Assets
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