A declining fixed asset turnover ratio can actually be caused by acquiring additional assets in the current period in preparation for greater future sales.

Question

Quizplus · Accepted Answer

Acquiring additional assets can lower the fixed asset turnover ratio in the short term, as the denominator (total fixed assets) increases while sales remain relatively constant. However, this investment in assets may enable the company to generate higher sales and ultimately improve the fixed asset turnover ratio in the future.

A Declining Fixed Asset Turnover Ratio Can Actually Be Caused