See Also:

Sensitivity Analysis Valuation

Working Capital Analysis

Return on Asset Analysis

Standard Chart of Accounts

SWOT Analysis

(ROE) Return on Equity

# Fixed Asset Turnover Analysis Definition

The definition of fixed asset turnover analysis and ratio shows what portion of sales is generated from fixed asset investment. Additionally, it is most likely to be useful for a capital-intensive company. In general, the higher the value, the better the company is.

### Fixed Asset Turnover Formula

Use the following formula to calculate fixed asset turnover:

Fixed asset turnover = sales ÷ fixed assets

### Fixed Asset Turnover Calculation

For example, a company has $10,000 in sales and $100,000 in fixed assets. Refer to the following calculation:

Fixed asset turnover = 10,000 / 50,000 = 0.2

This means that $0.2 of sales is generated for every dollar investment in fixed asset.

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## Fixed Asset Turnover Analysis

Fixed asset turnover measures how well a company is using its fixed assets to generate revenues. The higher the fixed asset turnover ratio, the more effective the company’s investments in fixed assets have become. Furthermore, a high ratio indicates that a company spent less money in fixed assets for each dollar of sales revenue. Whereas, a declining ratio indicates that a company has over-invested in fixed assets. Fixed asset turnover provides very useful information for both investors and management about whether or not a company is becoming more efficient in the use of its fixed assets by comparing its value with its historical records or industry average.

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#### Resources

For statistical information about industry financial ratios, please go to the following websites: www.bizstats.com and www.valueline.com.

Why divided by 50,000 not 100, 000???

It looksl like a mistake on the example calculation. It should have been 100,000.

u divide it with an average so, 100,000 is divided with 2 which makes it 50000.

Thhis site definitely has all of the information I needed concerning this subject and didn?t know

who to ask.

Wonderful Content Thanks for sharing. The fixed asset turnover ratio (FATR)compares net sales to net fixed assets. It is used because to evaluate the ability of management to generate sales from its investment in fixed assets.

Thanks for the feedback!