Fixed Asset Turnover Ratio

Net Sales Revenue ($)

Average Fixed Assets ($)

(Beginning Fixed Assets + Ending Fixed Assets) / 2

Alternative: Calculate Average Fixed Assets

Beginning Fixed Assets ($)

Ending Fixed Assets ($)

Results

Fixed Asset Turnover Ratio

Net Sales

Avg Fixed Assets

Interpretation

Excellent - Very efficient use of fixed assets

Good - Reasonable efficiency in asset utilization

Average - Moderate asset efficiency

Poor - Low efficiency in fixed asset utilization

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Fixed Asset Turnover Ratio Formula

Fixed Asset Turnover = Net Sales ÷ Average Fixed Assets

Components:

Net Sales: Total revenue minus returns and allowances
Average Fixed Assets: Mean of beginning and ending fixed assets
Fixed Assets: Property, plant, equipment (net of depreciation)

Interpretation:

Higher Ratio: More efficient use of fixed assets
Lower Ratio: Less efficient asset utilization
Industry Comparison: Compare with industry benchmarks
Trend Analysis: Track changes over time

Industry Benchmarks

Manufacturing

1.2 - 2.5x

Capital-intensive operations

Retail

3.0 - 6.0x

Lower fixed asset requirements

Technology

2.5 - 8.0x

Varies by business model

Utilities

0.3 - 0.8x

Heavy infrastructure investment

Airlines

0.8 - 1.5x

Expensive aircraft assets

Software

5.0 - 20.0x

Minimal fixed asset base

Analysis Tips

Key Considerations:

• Use net fixed assets (after depreciation)
• Consider asset age and condition
• Compare with industry peers
• Analyze trends over multiple periods
• Consider seasonal business patterns

Improvement Strategies:

• Optimize asset utilization rates
• Divest underperforming assets
• Implement preventive maintenance
• Consider leasing vs. buying
• Increase sales with existing assets