Fixed Asset Turnover

fixed asset turnover

A financial ratio that indicates a firm's ability to generate sales based on its long-term assets. Fixed asset turnover is calculated by dividing annual sales by the dollar amount of fixed assets. A high fixed asset turnover indicates management's effective use of the firm's fixed assets.

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Fixed Asset Turnover

A measure of how efficiently a business generates sales from its investments. That is, it is the ratio of the amount a company earns in sales to the average value of its fixed assets. Fixed assets are investments that cannot easily be converted into cash, such as a factory or computer system, and can be quite expensive. Thus, if a company has a high ratio, this means that its sales have kept pace with or exceeded the amount it has invested in fixed assets, which is a positive sign for the company.