FIXED ASSET TURNOVER Definition

Bookmark and Share

FIXED ASSET TURNOVER measures managements ability to generate revenues from investments in fixed assets. FAT considers only the firms investment in property, plant and equipment and is extremely important in high asset firms such as manufactures and telecommunications companies. Generally, the higher this ratio:

  • the smaller the investment required to generate sales, thus the more profitable the firm.
  • indicates the firm has less money tied up in fixed assets for each dollar of sales revenue.

A declining ratio may indicate that the firm has over-invested in plant, equipment, or other fixed assets. Formula: Net Revenues / Fixed Assets

Learn new Accounting Terms

FUNDAMENTAL ANALYSIS is a method used to evaluate the worth of a security by studying the financial data of the issuer. Performing fundamental analysis will teach you a lot about a company, but virtually nothing about how it will perform in the stock market. Apply this analysis on two competing companies or in comparison to its industry and it becomes clearer which the best investment choice is. See FUNDAMENTALS.

FOREIGN CURRENCY TRANSLATION is the process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements in the native currency of the parent company.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.