12/14/2023 0 Comments Average net fixed assets![]() ![]() The total asset turnover ratio should be interpreted in conjunction with the working capital turnover ratio. The fixed asset ratio is generally not very consistent, because even if the revenue is growing consistently, the fixed assets don’t have a smooth pattern. 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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