Fixed-Asset Turnover Ratio

  

Categories: Accounting, Metrics

In the same way that baseball-obsessed wonks have dozens of stats to see if a player is any good (OPS, OPS+, WAR, etc.), managers and investment mavens compute all sorts of figures to see how well a company makes money. The fixed-asset turnover ratio represents one of these.

It's calculated as a ratio of sales compared to the value of a company's fixed assets. Fixed assets comprise a firm's really durable holdings...its real estate, its factories and headquarters, etc.

The goal of the fixed-asset turnover ratio is to see how well the company leverages these assets into sales. The figure helps track whether the company gets enough out of its big-ticket holdings. If not, maybe the owners should sell the company to someone that does...and then take up a hobby or something.

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