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Intangible assets turnover ratio

Method of calculation

Formula for intangible assets turnover ratio: net revenues from sales / intangible and legal assets

Ratio's description

This ratio complements the tangible fixed assets turnover ratio. It indicates the effectiveness of intangible and legal assets use in the company.

Ratio's interpretation

  • Large ratio's values mean that financial resources engaged in these assets generate high revenues from sales.
  • When assessing the changes in the ratio's value over time (over few periods):
    • the increase of ratio's value is interpreted as an improvement of the effectiveness of intangible and legal assets use, which is assessed positively (provided that it comes from the increase of revenues from sales, and not the decrease of intangible and legal assets),
    • the decrease of ratio's value is interpreted as a deterioration of the effectiveness of intangible and legal assets use, and is thus assessed negatively.

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