Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
 Ratio Analysis Advantages
 Ratio Analysis
 Liquidity Ratios
 Cash Ratio
 Cash Ratio Formula
 Quick Ratio
 Quick Ratio Formula
 Current Ratio
 Current Ratio Formula
 Acid Test Ratio Formula
 Defensive Interval Ratio
 Working Capital Ratio
 Working Capital Formula
 Net Working Capital Formula
 Changes in Net Working Capital
 Cash Flow from Operations Ratio
 Cash Reserve Ratio
 Operating Cycle Formula
 Current Ratio vs Quick Ratio
 Bid Ask Spread
 Liquidity vs Solvency
 Liquidity
 Solvency
 Solvency Ratios
 Equity Ratio
 Capital Adequacy Ratio
 Liquidity Risk
 Altman Z Score
 Turnover Ratios
 Inventory Turnover Ratio
 Accounts Receivable Turnover
 Accounts Receivables Turnover Ratio
 Accounts Payable Turnover Ratio
 Days Inventory Outstanding
 Days in Inventory
 Days Sales Outstanding
 Average Collection Period
 Days Payable Outstanding
 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
 Debtor Days Formula
 Working Capital Turnover Ratio
 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
 Vertical Analysis of Income Statement
 Profit Margin
 Gross Profit Margin Formula
 Gross Profit Percentage
 Operating Profit Margin Formula
 EBIT Margin Formula
 Operating Income Formula
 Net Profit Margin Formula
 EBIDTA Margin
 Degree of Operating Leverage Formula (DOL)
 NOPAT Formula
 OIBDA
 Earnings Per Share
 Basic EPS
 Diluted EPS
 Basic EPS vs Diluted EPS
 Return on Equity (ROE)
 Return on Capital Employed (ROCE)
 Return on Invested Capital (ROIC)
 Return on Sales
 ROIC Formula (Return on Invested Capital)
 Return on Investment Formula (ROI)
 ROIC vs ROCE
 ROE vs ROA
 CFROI
 Cash on Cash Return
 Return on Total Assets (ROA)
 Return on Average Capital Employed
 Capital employed Employed
 Return on Average Assets (ROAA)
 Return on Average Equity (ROAE)
 Return on Assets Formula
 Return on Equity Formula
 DuPont Formula
 Net Interest Margin Formula
 Earnings Per Share Formula
 Diluted EPS Formula
 Contribution Margin Formula
 Unit Contribution Margin
 Revenue Per Employee Ratio
 Operating Leverage
 EBIT vs EBITDA
 EBITDAR
 Capital Gains Yield
 Tax Equivalent Yield
 LTM Revenue
 Operating Expense Ratio Formula
 Overhead Ratio Formula
 Variable Costing Formula
 Capitalization Rate
 Cap Rate Formula
 Comparative Income Statement
 Capacity Utilization Rate Formula
 Total Expense Ratio Formula
 Efficiency Ratios
 Dividend Ratios
 Debt Ratios
 Debt to Equity Ratio
 Debt Coverage Ratio
 Debt Ratio
 Debt to Asset Ratio Formula
 Coverage Ratio
 Coverage Ratio Formula
 Debt to Income Ratio Formula (DTI)
 Capital Gearing Ratio
 Capitalization Ratio
 Interest Coverage Ratio
 Times Interest Earned Ratio
 Debt Service Coverage Ratio (DSCR)
 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
 What is Fixed Asset Turnover Ratio Formula?
 Examples of Fixed Asset Turnover Ratio Formula
 Fixed Asset Turnover Ratio Formula Calculator
What is Fixed Asset Turnover Ratio Formula?
The fixed asset turnover ratio formula is a measure of the efficiency of a company and is evaluated as a return on their investment in fixed assets such as property, plant and equipment. In other words, it assesses the ability of a company to efficiently generate net sales from its machines and equipment. The formula for the fixed asset turnover ratio is calculated by dividing net sales by net fixed assets i.e. (gross fixed assets minus accumulated depreciation).
The formula of Fixed Asset Turnover Ratio is represented as,
or
Steps to Calculate Fixed Asset Turnover Ratio Formula
The fixed asset turnover ratio calculation can be simply done by using the following steps:
 Step #1: Firstly, note the net sales of the company which is easily available as a line item in the income statement.
 Step #2: Next, the average net fixed assets can be calculated from the balance sheet by taking the average of opening and closing net fixed assets. On the other hand, gross fixed assets and accumulated depreciation can also be captured from the balance sheet to calculate the net fixed assets by deducting the accumulated depreciation from the gross fixed assets.
 Step #3: Finally, the calculation of the fixed asset turnover ratio is done by dividing the net sales by the net fixed assets as shown below.
Examples of Fixed Asset Turnover Ratio Formula
Let us see some simple to advanced examples of Fixed Asset Turnover Ratio Formula to understand it better.
Fixed Asset Turnover Ratio Formula – Example #1
Let us consider two independent companies X and Y that manufactures office furniture and distribute it to the sellers as well as customers in various regions of the USA. The following information for both the companies is available:
From the above table, the following can be calculated,
Based on the above information calculate the fixed assets turnover ratio for both the companies. Also, compare and determine which company is more efficient in using its fixed assets?
As per the question,
Average net fixed asset for Company X = (Opening net fixed assets + Closing net fixed assets) /2
The average net fixed asset for Company Y=(Opening net fixed assets + Closing net fixed asset)/2
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Therefore,
Fixed asset turnover ratio for Company X = Net sales / Average net fixed assets
So, from the above calculation Fixed asset turnover ratio for company X will be:
Fixed asset turnover ratio for Company Y = Net sales / Average net fixed assets
So, from the above calculation Fixed asset turnover ratio for company Y will be:
Therefore, company Y generates a sales revenue of $3.34 for each dollar invested in fixed assets as compared to company X which generates a sales revenue of $3.19 for each dollar invested in fixed assets. Based on the above comparison, it can be said that Company Y is slightly more efficient in utilizing its fixed assets.
Fixed Asset Turnover Ratio Formula – Example #2
Let us take the example of Apple Inc. For the fixed asset turnover ratio calculation of the fiscal year ended on September 29, 2018. As per the annual report, the following information is available:
Based on the above information the Fixed Assets Turnover Ratio calculation for Apple Inc.will be as follows
As per the question,
Net fixed asset for 2017 = Gross fixed assets (2017) – Accumulated depreciation (2017)
Net fixed asset for 2018 = Gross fixed assets (2018) – Accumulated depreciation (2018)
Average net fixed asset = [Net fixed assets (2017) + Net fixed assets (2018)] /2
Fixed asset turnover ratio for Apple Inc. = Net sales / Average net fixed assets
Therefore, Apple Inc. generates a sales revenue of $7.07 for each dollar invested in fixed assets during 2018.
Fixed Asset Turnover Ratio Formula Calculator
You can use the following Fixed Asset Turnover Ratio Formula calculator
Net Sales  
Average Net Fixed Assets  
Fixed Asset Turnover Ratio Formula =  
Fixed Asset Turnover Ratio Formula = 


Relevance and Uses of Fixed Asset Turnover Ratio Formula
 The fixed asset turnover ratio is an important formula from the point of view of an investor and creditor who use this formula to assess how well a company is utilizing its machines and equipment to generate sales. This concept is important for investors because it can be used to measure the approximate return on their investment in fixed assets.
 On the other hand, the creditors use the ratio to check if the company has the potential to generate adequate cash flow from the newly purchased equipment in order to pay back the loan that has been used to purchase it. This ratio is typically useful in the case of the manufacturing industry where companies have large and expensive equipment purchases.
 However, the senior management of any company seldom uses this ratio because they have insider information about sales figures, equipment purchases and other such details which are not readily available to outsiders. The management prefers to measure the return on their purchases based on more detailed and specific information.
 If the company has too much invested in the company’s assets, then their operating capital will be too high. Otherwise, if the company does not have enough invested in its assets, then the company might end up losing sales which will hurt its profitability, free cash flow and eventually stock price. As such, it is important for the management to determine the right amount of investment in each of their assets.
 It can be done by comparing the ratio of the company to that of other companies in the same industry and analyze how much others have invested in similar assets. Further, the company can also track how much they have invested in each asset every year and draw a pattern to check the yearonyear trend.
Recommended Articles
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