Fixed asset turnover


Fixed asset turnover

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.

Fixed Asset Turnover = frac{Sales}{Average net fixed assets} [ [http://www.college-cram.com/study/finance/presentations/134 Ratios of Asset Management: Fixed Assets Turnover Ratio ] ]

Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each dollar of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.

References


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