Fixed asset turnover ratio – meaning and formula

Fixed asset turnover ratio - meaning and formula
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The fixed assets turnover ratio measures the efficiency with which the firm is utilizing its investment in fixed assets, such as land, building, plant and machinery, furniture, etc. It also indicates the adequacy of sales in relation to investment in fixed assets. The fixed assets turnover ratio is sales divided by the net fixed assets (i.e., the depreciated value of fixed assets).

Assets Turnover Ratio = sales/fixed asset

The turnover of fixed assets can provide a good indicator for judging the efficiency with which fixed assets are utilized in the firm. A high fixed assets turnover ratio indicates the efficient utilization of fixed assets in generating operating revenue. A low ratio signifies idle capacity, inefficient utilization, and management of fixed assets.

Author: amidu edson

I am certified accountant with more than 5 years of teaching experience. Currently am teaching auditing and assurance, management accounting and financial accounting for student preparing for professional exams such as ACCA and CPA.

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