Fixed asset turnover ratio (FATR) is an efficiency ratio that shows how well a company has used fixed assets to generate sales. It compares net sales to fixed assets to calculate a company's return on investment in plants, buildings, equipment, and other fixed assets.
Fixed Assets Turnover Ratio
Average Fixed Assets
It is most beneficial to compare firms in different manufacturing concerns. The real estate turnover ratio cannot be used in asset-light sectors, such as those that rely heavily on technology.
The Fixed Asset turnover ratio only measures the correlation between Fixed Assets and net sales and not the cause of what impacted the figures.
Two companies in the same industry or over a separate industry can have different accounting policies with regard to depreciation methods. This skews the results of the comparison of fixed assets turnover ratio over the industry.
The Fixed Assets turnover ratio is helpful in performing entities having high-value investments in assets where the board of directors want to assess the efficiency of these fixed assets in relation to the turnover of the company.