Fixed asset turnover
Encyclopedia
Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed asset
s (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.
Fixed asset
Fixed assets, also known as a non-current asset or as property, plant, and equipment , is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets...
s (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.
External links
- http://www.investopedia.com/terms/f/fixed-asset-turnover.asp
- http://www.businessdictionary.com/definition/fixed-asset-turnover-ratio.html
- http://www.investopedia.com/university/ratios/operating-performance/ratio1.asp