Finance Formulas / July 6, 2018 / Alyvia French
Conversely, firms in sectors, such as utilities and telecommunications, which have large asset bases will have lower asset turnover. Since this ratio can vary widely from one industry to the next, considering the asset turnover ratios of a retail company and a telecommunications company will not make for an accurate comparison. Comparisons are only meaningful when they are made for different companies within the same sector.
The higher the debt ratio, the more leveraged a company is, implying greater financial risk. At the same time, leverage is an important tool that companies use to grow, and many businesses find sustainable uses for debt.
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