The formula used to calculate the Operating Asset Turnover is:
\[ \text{Operating Asset Turnover} = \frac{\text{Sales}}{\text{Operating Assets}} \]
Operating Asset Turnover measures how efficiently a company uses its operating assets to generate sales revenue. It is calculated by dividing the total sales by the total operating assets.
Let's consider the following data for a company named Alpha:
Using the formula:
\[ \text{Operating Assets} = \$250,000 + \$200,000 + \$400,000 + \$100,000 + \$1,000,000 = \$1,950,000 \]
\[ \text{Operating Asset Turnover} = \frac{\$3,000,000}{\$1,950,000} \approx 1.538 \]