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

REPLACEMENT COST NEW is the current cost of a similar new property having the nearest equivalent utility to the property being valued.

FX ACCOUNT (Foreign Exchange Account) is a trading account usually based in foreign currencies.

Suggest a Term

Enter Search Term

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