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

REDEEMABLE means cashable, i.e. able to be converted into ready money or its equivalent, e.g. redeemable stocks and bonds or a cashable check.

MISCELLANEOUS INCOME is that income realized that is not directly related to the sale of standard products and services.

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