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Zale Corp (NYSE:ZLC)
Asset Turnover
0.51 (As of Jan. 2014)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Average Total Assets. Zale Corp's Revenue for the three months ended in Jan. 2014 was \$656 Mil. Zale Corp's Average Total Assets for the quarter that ended in Jan. 2014 was \$1,300 Mil. Therefore, Zale Corp's asset turnover for the quarter that ended in Jan. 2014 was 0.51.

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula. Zale Corp's annualized Return on Equity (ROE) for the quarter that ended in Jan. 2014 was 117.76%. It is also linked to Return on Assets (ROA) through Du Pont Formula. Zale Corp's annualized Return on Assets (ROA) for the quarter that ended in Jan. 2014 was 15.62%.

Definition

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

Zale Corp's Asset Turnover for the fiscal year that ended in Jul. 2013 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: Jul. 2013 ) / ( (Total Assets (A: Jul. 2012 ) + Total Assets (A: Jul. 2013 )) / 2 ) = 1888.016 / ( (1171.038 + 1187.255) / 2 ) = 1888.016 / 1179.1465 = 1.60

Zale Corp's Asset Turnover for the quarter that ended in Jan. 2014 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Jan. 2014 ) / ( (Total Assets (Q: Oct. 2013 ) + Total Assets (Q: Jan. 2014 )) / 2 ) = 656.449 / ( (1319.824 + 1280.704) / 2 ) = 656.449 / 1300.264 = 0.50

* 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.

Zale Corp's annulized Return on Equity (ROE) for the quarter that ended in Jan. 2014 is

 Return on Equity (ROE) (Q: Jan. 2014 ) = Net Income / Average Shareholder Equity = 203.144 / 172.514 = (Net Income / Revenue) * (Revenue / Average Total Assets) * (Average Total Assets / Average Equity) = (203.144 / 2625.796) * (2625.796 / 1300.264) * (1300.264 / 172.514) = Net Profit Margin * Asset Turnover * Leverage Ratio = 7.74 % * 2.0194 * 7.5372 = Return on Assets * Leverage Ratio = 15.62 % * 7.5372 = 117.76 %

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

Zale Corp's annulized Return on Assets (ROA) for the quarter that ended in Jan. 2014 is

 Return on Assets (ROA) (Q: Jan. 2014 ) = Net Income / Average Total Assets = 203.144 / 1300.264 = (Net Income / Revenue) * (Revenue / Average Total Assets) = (203.144 / 2625.796) * (2625.796 / 1300.264) = Net Profit Margin * Asset Turnover = 7.74 % * 2.0194 = 15.62 %

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

Zale Corp Annual Data

 Jul04 Jul05 Jul06 Jul07 Jul08 Jul09 Jul10 Jul11 Jul12 Jul13 turnover 1.75 1.75 1.72 1.58 1.41 1.34 1.35 1.48 1.58 1.60

Zale Corp Quarterly Data

 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 turnover 0.28 0.52 0.36 0.34 0.29 0.52 0.35 0.34 0.29 0.51
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