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Walgreen Co (NYSE:WAG)
Asset Turnover
0.46 (As of Nov. 2014)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Average Total Assets. Walgreen Co's Revenue for the three months ended in Nov. 2014 was \$19,554 Mil. Walgreen Co's Average Total Assets for the quarter that ended in Nov. 2014 was \$42,897 Mil. Therefore, Walgreen Co's asset turnover for the quarter that ended in Nov. 2014 was 0.46.

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula. Walgreen Co's annualized Return on Equity (ROE) for the quarter that ended in Nov. 2014 was 15.66%. It is also linked to Return on Assets (ROA) through Du Pont Formula. Walgreen Co's annualized Return on Assets (ROA) for the quarter that ended in Nov. 2014 was 7.54%.

Definition

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

Walgreen Co's Asset Turnover for the fiscal year that ended in Aug. 2014 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: Aug. 2014 ) / ( (Total Assets (A: Aug. 2013 ) + Total Assets (A: Aug. 2014 )) / 2 ) = 76392 / ( (35481 + 37182) / 2 ) = 76392 / 36331.5 = 2.10

Walgreen Co's Asset Turnover for the quarter that ended in Nov. 2014 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Nov. 2014 ) / ( (Total Assets (Q: Aug. 2014 ) + Total Assets (Q: Nov. 2014 )) / 2 ) = 19554 / ( (37182 + 48612) / 2 ) = 19554 / 42897 = 0.46

* 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.

Walgreen Co's annulized Return on Equity (ROE) for the quarter that ended in Nov. 2014 is

 Return on Equity (ROE) (Q: Nov. 2014 ) = Net Income / Average Shareholder Equity = 3236 / 20664 = (Net Income / Revenue) * (Revenue / Average Total Assets) * (Average Total Assets / Average Equity) = (3236 / 78216) * (78216 / 42897) * (42897 / 20664) = Net Profit Margin * Asset Turnover * Leverage Ratio = 4.14 % * 1.8233 * 2.0759 = Return on Assets * Leverage Ratio = 7.54 % * 2.0759 = 15.66 %

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

Walgreen Co's annulized Return on Assets (ROA) for the quarter that ended in Nov. 2014 is

 Return on Assets (ROA) (Q: Nov. 2014 ) = Net Income / Average Total Assets = 3236 / 42897 = (Net Income / Revenue) * (Revenue / Average Total Assets) = (3236 / 78216) * (78216 / 42897) = Net Profit Margin * Asset Turnover = 4.14 % * 1.8233 = 7.54 %

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

Historical Data

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

Walgreen Co Annual Data

 Aug05 Aug06 Aug07 Aug08 Aug09 Aug10 Aug11 Aug12 Aug13 Aug14 turnover 3.02 2.99 2.95 2.83 2.66 2.62 2.69 2.35 2.10 2.10

Walgreen Co Quarterly Data

 Aug12 Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 turnover 0.56 0.50 0.53 0.51 0.50 0.51 0.53 0.52 0.51 0.46
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