A fixed asset turnover ratio is an efficiency ratio that shows the return received by a company on the investments made by them in fixed assets such as plant, machinery, equipment, etc., in relation to the total sales generated. In other words, it measures how efficiently a company uses its fixed assets to make sales.
Creditors and investors refer to this ratio to identify the efficiency of the company in managing its fixed assets. They do so to interpret the returns they might earn on their investments made in the company and make sure that the earnings/revenues from the equipment are enough so that the company can pay back the loans that it has taken for it.
The formula for calculating the fixed asset turnover ratio
about 4 months ago