When comparing a fixed asset turnover ratio to a total asset turnover ratio,a company with a high amount of inventory will have a much lower fixed asset turnover ratio than total asset turnover ratio.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio measures how efficiently a company uses its fixed assets to generate sales, while the total asset turnover ratio measures how efficiently a company uses all its assets (including inventory) to generate sales. A company with a high amount of inventory might actually have a lower total asset turnover ratio if that inventory is not efficiently converted into sales, but this does not directly lead to a much lower fixed asset turnover ratio compared to the total asset turnover ratio. The comparison depends more on how effectively the fixed assets alone are used to generate sales, not on the amount of inventory.

When Comparing a Fixed Asset Turnover Ratio to a Total