the increase of ratio's value is interpreted as an improvement of tangible fixed assets use (provided that this increase does not only result from the growing wear of tangible fixed assets),.This efficiency ratio compares net sales (income statement) to fixed assets (balance sheet.

When assessing the changes in ratio's value over time (over few periods): The fixed asset turnover ratio formula is calculated by dividing net sales by the total property, plant, and equipment net of accumulated depreciation. The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure operating performance.The formula is: Asset Turnover Ratio Net Sales / Average Total. The fixed assets include land, building, furniture, plant, and equipment. While assesing the ratio some care should be taken – high values of the ratio may result from the low level of tangible fixed assets, which are worn and amortized to a large extent (thus it is also worth to assess the quality of fixed assets). The asset turnover ratio compares performance from the income statement with the companys financial health on the balance sheet. The fixed asset turnover ratio is an efficiency ratio that compares net sales to fixed assets to determine a company’s return on investment in fixed assets. The value of goodwill, long-term deferred tax and other fixed assets that do not belong to property, plant and equipment is usually subtracted from the total fixed assets to present a more meaningful fixed asset turnover ratio. The following is the analysis for this ratio. The formula for calculation of fixed asset turnover ratio is given below The fixed assets usually include property, plant and equipment. Based on the scenario and formula provided, Fixed Assets Turnover would be 50,000,000/100,000,000 50. Assuming that USD 50,000,000 is made from the production related to the machine, USD 100,000,000 and all of the goods for these machines are included.

High ratio's values indicate that the cash invested in tangible fixed assets produce high levels of revenues from sales. Answer: Now let’s do the calculation together. Tangible fixed assets turnover ratio describes the effectiveness of tangible fixed assets management in the company. Also read: What Is Depreciation Fixed Assets Vs Current Assets Intangible. Knowledge base > Financial analysis > Efficiency (activity) ratios > Tangible fixed assets turnover Tangible fixed assets turnover Fixed Asset Turnover Ratio Net Sales / Fixed Assets Accumulated Depreciation.

Fixed asset turnover ratio formula