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

LONG-TERM LIABILITIES are liabilities of a business that are due in more than one year. An example of a long-term liability would be a mortgage payable.

AR is Accounts Receivable.

Suggest a Term

Enter Search Term

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