Fixed-Asset Turnover Ratio


DEFINITION of 'Fixed-Asset Turnover Ratio'

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

The fixed-asset turnover ratio is calculated as:

Fixed-Asset Turnover Ratio

BREAKING DOWN 'Fixed-Asset Turnover Ratio'

This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was.

  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  4. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  5. Property, Plant And Equipment - ...

    A company asset that is vital to business operations but cannot ...
  6. Net Sales

    The amount of sales generated by a company after the deduction ...
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  1. Which financial ratios are considered to be efficiency ratios?

    Efficiency ratios generally measure a company's ability to use its assets and liabilities to generate revenues or profits. ... Read Full Answer >>
  2. What is considered to be a good fixed asset turnover ratio?

    The fixed asset turnover ratio is a metric that measures sales to the value of fixed assets. It measures how well a company ... Read Full Answer >>
  3. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  4. Why are efficiency ratios important to investors?

    When analyzing a company's potential for investment, it is important to examine its financial performance from every angle. ... Read Full Answer >>
  5. What are pro forma earnings?

    Great question, but it is not easily answered, because pro forma earnings figures are inherently different for different ... Read Full Answer >>
  6. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>

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