FIXED ASSET TURNOVER Definition

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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

MANAGEMENT CONTROLS are controls performed by one or more managers.

SUCCESSOR AUDITOR is the auditor of a client for the current year when that client had another auditor in prior years. The auditor who no longer audits  that client is the predecessor auditor.

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