The more efficiently a company uses its fixed assets the lower will be the fixed asset turnover ratio.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated by dividing a company's net sales by its fixed assets. A high turnover ratio indicates that the company is using its fixed assets more efficiently, generating more revenue with fewer investments in property, plant, and equipment. Conversely, a low turnover ratio indicates that the company is using its fixed assets less efficiently, generating less revenue relative to the value of its fixed assets. Therefore, the more efficiently a company uses its fixed assets, the higher will be the fixed asset turnover ratio, not the lower.

The More Efficiently a Company Uses Its Fixed Assets the Lower