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Quick Definition

Measures a company’s effectiveness in generating sales revenue from investments made in the company.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

financial ratio analysis success kit

Click the button to learn more about the Financial Analysis Success Kit

Fixed Asset Turnover Formula

Explanation of Fixed Asset Turnover

The Fixed Asset Turnover is similar to Total Asset Turnover, which both measure a company’s effectiveness in generating Net Sales revenue from investments back into the company. However, the Fixed Asset Turnover ratio evaluates only the Net Property Plant Equipment investments.

Manufacturing and other industries requiring major-investments will often spend heavily on properties, manufacturing plants, and equipment to push themselves ahead of the competition.

Importance of Fixed Asset Turnover

The higher the Fixed Asset Turnover ratio, the more effective the company’s investments in Net Property Plant Equipment have become. You may have to search for the explanation in the financial statements to find out what investments were made, as large capital investment purchases may not immediately yield higher sales.

It may take a year or multiple years companies to fully utilize these large investments. If you can clearly see the company invested in major improvements heavily one year, it would be wise to watch the Fixed Asset Turnover closely over the next year or more to gauge how well those investments actually helped the company.