The fixed asset turnover ratio formula is following:įixed Asset Turnover Ratio = (Net Sales / Net Fixed Assets) Net Sales Especially, fixed asset turnover ratio is especially useful in the manufacturing industry where companies have large and costly equipment purchases.įrom a creditor point of view, this ratio measures how efficiently a company uses its newly purchased machinery to generate profit to pay back debts What is the Fixed Asset Turnover Ratio Formula? This ratio assists investors in how much profit a company generates only from fixed assets. The fixed asset turnover measures how well a company is producing sales using its net fixed assets. The net fixed assets contain property, plant and equipment. The fixed asset turnover ratio is a financial ratio calculated by dividing net sales by the net fixed assets of a company. In another word, the fixed asset turnover ratio measures how well the management of a company is putting efforts to produce more sales using its fixed assets.Ī higher fixed asset turnover ratio reflects the company is generating more and more sales using its net fixed assets compared to others. The proportion of net sales generated per rupee invested in fixed assets. The fixed asset turnover ratio is an efficiency ratio that gauges how efficiently a company's management utilizes its fixed assets to generate sales. It gives valuable knowledge about the company to investors, creditors, analysts and the company's management such as how the company uses fixed assets to improve efficiency. The fixed asset turnover ratio is one of the most important ratios to consider the overall uses of fixed assets by a company, which may also call return on assets and this ratio mostly used by creditors, investors and analysts.
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