What is fixed asset turnover?
The fixed asset turnover ratio measures how efficiently a company converts its investment in fixed assets, such as property, plant, and equipment, into sales revenue. It is especially useful for comparing capital-intensive businesses like manufacturers or utilities.
The formula
Fixed Asset Turnover = Net Sales ÷ Average Net Fixed Assets, where average net fixed assets is typically the beginning and ending balance for the period averaged together: (Beginning + Ending) ÷ 2. A higher ratio generally means each dollar tied up in fixed assets is generating more sales.
Enter net sales along with beginning and ending net fixed assets (after depreciation) for the period to calculate the ratio. This metric is most meaningful when compared against industry peers or the same company’s own historical trend, and this tool is for general financial education, not investment advice.