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Discover Financial Services (NYSE:DFS)
Asset Turnover
0.03 (As of Jun. 2014)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Total Assets. Discover Financial Services's Revenue for the three months ended in Jun. 2014 was $2,172 Mil. Discover Financial Services's Total Assets for the quarter that ended in Jun. 2014 was $78,937 Mil. Therefore, Discover Financial Services's asset turnover for the quarter that ended in Jun. 2014 was 0.03.

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula. Discover Financial Services's annualized Return on Equity (ROE) for the quarter that ended in Jun. 2014 was 22.63%. It is also linked to Return on Assets (ROA) through Du Pont Formula. Discover Financial Services's annualized Return on Assets (ROA) for the quarter that ended in Jun. 2014 was 3.26%.


Definition

Asset Turnover measures how quickly a company turns over its asset through sales.

Discover Financial Services's Asset Turnover for the fiscal year that ended in Dec. 2013 is calculated as

Asset Turnover=Sales (A: Dec. 2013 )/Total Assets (A: Dec. 2013 )
=Revenue/Total Assets
=8224/79340
=0.10

Discover Financial Services's Asset Turnover for the quarter that ended in Jun. 2014 is calculated as

Asset Turnover=Sales (Q: Jun. 2014 )/Total Assets (Q: Jun. 2014 )
=Revenue/Total Assets
=2172/78937
=0.03

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio.


Explanation

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula.

Discover Financial Services's annulized Return on Equity (ROE) for the quarter that ended in Jun. 2014 is

Return on Equity (ROE)
=Net Income/Total Shareholder Equity
=2576/11381
=(Net Income / Revenue)*(Revenue / Total Assets)*(Total Assets / Total Shareholder Equity)
=(2576 / 2172)*(2172 / 78937)*(78937 / 11381)
=Net Profit Margin*Asset Turnover*Leverage Ratio
=1.186*0.0275*6.9359
=Return on Assets*Leverage Ratio
=3.26 %*6.9359
=22.63 %

Note: The Net Income data used here is four times the quarterly (Jun. 2014) net income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

It is also linked to Return on Assets (ROA) through Du Pont Formula:

Discover Financial Services's annulized Return on Assets (ROA) for the quarter that ended in Jun. 2014 is

Return on Assets (ROA)
=Net Income/Total Assets
=2576/78937
=(Net Income / Revenue)*(Revenue / Total Assets)
=(2576 / 2172)*(2172 / 78937)
=Net Profit Margin*Asset Turnover
=1.186*0.0275
=3.26 %

Note: The Net Income data used here is four times the quarterly (Jun. 2014) net income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.

Therefore, it is a good sign if a company's asset turnover is consistent or even increases. If a company's asset grows faster than sales, its asset turnover will decline, which can be a warning sign.


Related Terms

Revenue, Total Assets, Return on Equity, Return on Assets


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Discover Financial Services Annual Data

Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Dec12Dec13
turnover 0.160.170.140.120.150.110.100.100.110.10

Discover Financial Services Quarterly Data

May12Aug12Nov12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
turnover 0.030.030.030.030.030.030.030.030.030.03
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