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. 

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Fixed Assets Turnover Ratio  

Average Fixed Assets 


Net Sales 

Limitation Of Fixed Assets Turnover Ratio 

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Industry Limitations 

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.

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Does Not Take Profit Into Account 

The Fixed Asset turnover ratio only measures the correlation between  Fixed Assets and net sales and not the cause of what impacted the figures.

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Difference in Accounting Policies 

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.

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Performance Subject to Manipulation 

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.