Which ratio most likely indicates strong "Capacity" for a company?

A high asset turnover ratio is indicative of a company's strong capacity to generate sales relative to its assets. It reflects how efficiently a company is utilizing its assets to produce revenue. When the asset turnover ratio is high, it suggests that the company is effectively leveraging its asset base to support its operations and generate income, which is a key aspect of its financial health and operational efficiency.

Investors and analysts look for high asset turnover as a sign that the company can sustain its operations, pay off debts, and reinvest in growth opportunities. This efficient use of assets typically points to robust operational management and a strong market position. In contrast, a low asset turnover ratio could indicate underutilization of assets, poor sales performance, or inefficiencies in operations, which may signal underlying issues with the company's capacity to generate revenue.