AccountingHub
A3

Margin times turnover

Drag profit margin or total asset turnover and watch return on assets move.

Margin × turnover
Profit margin

10%

Total asset turnover

1.09

Return on assets

10.9%

ratios all divide some measure of profit by some measure of size. Profit margin divides by sales; return on total assets divides by the assets that produced those sales.

Return on total assets factors cleanly into profit margin times total asset turnover — a grocery store survives on thin margins and fast turnover, a jeweler on fat margins and slow turnover, and both can land on the same return.