This fixed asset turnover template teaches you how to calculate the fixed asset turnover ratio using the formula:
Fixed Asset Turnover = Net Sales / Average Fixed Assets.
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Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or efficiently the business uses fixed assets to generate sales. This ratio divides net sales into net fixed assets over an annual period. The net fixed assets include the amount of property, plant, and equipment less the accumulated depreciation. Generally, a higher fixed asset ratio implies the effective utilization of investments in fixed assets to generate revenue. This ratio would be analyzed alongside leverage and profitability ratios.
The formula for calculating the fixed asset turnover ratio is:
Fixed Asset Turnover = Net Sales / Average Fixed Assets
How Useful is the Fixed Asset Turnover Ratio to Investors?
Investors who are looking for investment opportunities in an industry with capital-intensive businesses may find FAT useful in evaluating and measuring the return on the money invested. This evaluation helps them make critical decisions on whether or not to continue investing, and it also determines how well a particular business is being run. It is likewise useful in analyzing a company’s growth to see if they are augmenting sales in proportion to their asset bases.
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