Which ratio would you use to evaluate how quickly a company can convert its assets into sales?

The asset turnover ratio is a key metric used to evaluate how efficiently a company utilizes its assets to generate sales. It measures the relationship between a company's total sales and its average total assets. A higher asset turnover ratio indicates that a company is proficient at converting its investments in assets into revenue, suggesting effective management and utilization of resources.

In the context of financial analysis, understanding asset turnover is crucial because it gives insights into how well a company can generate sales from its asset base. This is particularly important for assessing a company's operational efficiency and its ability to maximize output from its available resources.

Other ratios, such as return on equity, operating expense ratio, and debt to equity ratio, focus on different aspects of financial performance and do not directly assess the conversion of assets into sales. Return on equity measures profitability relative to shareholders' equity, operating expense ratio analyzes how much of a company's revenue is consumed by operating expenses, and debt to equity ratio evaluates financial leverage and risk. While each of these ratios serves a valuable purpose in financial analysis, they do not specifically measure how effectively assets are turned into sales.