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Fixed Asset Turnover Ratio

Fixed Asset Turnover Ratio

Similar to the total asset turnover ratio, this ratio measures the efficiency with which the fixed assets of a company are employed, how well the fixed assets are utilized to generate revenue. In other words, it measures sales per dollar of investment in fixed assets. Analysts prefer this measure of effectiveness since fixed assets are more closely related to the production process rather than current assets like cash and accounts receivables.

Fixed Asset Turnover

When calculating a companies fixed asset turnover ratio, it is important that you calculate the net fixed assets, which is simply the current assets that a company owns minus the accumulated depreciation of those assets.…