Similarly, the company is generating $0.71 for every $1 of total assets.Ī high asset turnover ratio indicates greater efficiency.Ī low asset turnover ratio indicates inefficiency, or high capital-intensive nature of the business.Ī low fixed asset turnover ratio could also mean that the company’s assets are new (less depreciation). The total asset turnover ratio will be $1,200,000/($700,000 + $1,000,000) = 0.71Ī fixed asset turnover ratio of 1.71 indicates that the company is generating $1.71 for every $1 of fixed assets. Its average current assets were $700,000, and average fixed assets were $1,000,000. ![]() Total Assets include both fixed assets and current assets.Īssume that a company has $1.2 million in sales for the year. Total asset turnover ratio measures how much revenue a company generates from every dollar of the total assets.į i x e d A s s e t T u r n o v e r = R e v e n u e A v e r a g e N e t F i x e d A s s e t s Fixed\ Asset\ Turnover = \frac T o t a l A sse t T u r n o v er = A v er a g e T o t a l A sse t s R e v e n u e Fixed asset turnover ratio measures how much revenue a company generates from every dollar of fixed assets. ![]() Fixed Asset and Total Asset turnover ratios reflect how effectively the company is using its assets, i.e., their ability to generate revenue from the given assets.
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