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Fixed Asset Turnover

April 13, 2006

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Fixed asset turnover is the ratio of sales (on your income statement) to the value of your fixed assets (on your balance sheet). It indicates how well your business is using its fixed assets to generate sales.

Generally speaking, the higher the ratio, the better because a high ratio indicates your business has less money tied up in fixed assets for each dollar of sales revenue. A declining ratio may indicate that you've over-invested in plant, equipment, or other fixed assets.

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