However, no one rule defines what a good fixed asset turnover ratio is. This is because a high fixed asset turnover indicates that the company is effective and efficient in utilizing its fixed assets or PP&E. We generally assume that the higher the fixed asset turnover ratio, the better. Hence, the fixed asset turnover for Company Alpha is $7,500,000 / $16,500,000 = 0.45x.Īfter understanding the fixed asset turnover ratio formula, we need to know how to interpret the results. The final step is to calculate the fixed asset turnover with the fixed asset turnover formula:įixed asset turnover = revenue / average fixed assets Of course, you can also access this information from some financial data sites, such as Bloomberg and Financial Times. Check our revenue Calculator and sales calculator to understand more on this topic. You can find the income statement in every company's annual report. The revenue is always the first line item on a company's income statement. The average fixed assets can be calculated using the formula below:Īverage fixed assets = (starting fixed assets + final fixed assets) / 2įor our example, the average fixed assets is equal to ($15,000,000 + $18,000,000) / 2 = $16,500,000.ĭetermining the revenue of a company is straightforward. Assuming you have bought a stock of Company Alpha with the following information:Ĭalculating the fixed asset turnover ratio requires only 3 steps: Let's talk about how the fixed asset turnover formula works using an example.
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