1. What is Fixed Asset Turnover?

Fixed Asset Turnover is a financial ratio that measures a company's efficiency in generating sales from its fixed assets (property, plant, and equipment). It shows how well the company is using its fixed assets to produce revenue.

2. How Does the Calculator Work?

The calculator uses the Fixed Asset Turnover formula:

Where:

• \( Sales \) — Total revenue generated (USD)
• \( Average Fixed Assets \) — (Beginning Fixed Assets + Ending Fixed Assets) / 2 (USD)

Explanation: The ratio indicates how many dollars of sales a company generates for each dollar invested in fixed assets.

3. Importance of Fixed Asset Turnover

Details: This ratio is important for assessing operational efficiency. A higher ratio generally indicates better utilization of fixed assets, while a lower ratio may suggest underutilization or overinvestment in fixed assets.

4. Using the Calculator

Tips: Enter sales and average fixed assets in USD. Both values must be positive numbers. The result is a unitless ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Fixed Asset Turnover ratio?
A: The ideal ratio varies by industry. Capital-intensive industries (like manufacturing) typically have lower ratios than service industries.

Q2: How is Average Fixed Assets calculated?
A: Average Fixed Assets = (Beginning Fixed Assets + Ending Fixed Assets) / 2, usually taken from the balance sheet.

Q3: Can the ratio be too high?
A: Yes, an extremely high ratio might indicate the company is not investing enough in maintaining or upgrading its fixed assets.

Q4: How does this differ from Total Asset Turnover?
A: Fixed Asset Turnover only considers fixed assets, while Total Asset Turnover considers all assets (current + fixed).

Q5: What are limitations of this ratio?
A: It doesn't account for asset age or condition, and comparisons are only meaningful within the same industry.