Black's equation: Difference between revisions
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'''Fixed-asset turnover''' is the ratio of sales (on the profit and loss account) to the value of [[fixed asset]]s (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. | |||
<math>Fixed\ Asset\ Turnover = \frac{Net\ sales}{Average\ net\ fixed\ assets}</math> <ref name="isbn0-631-23100-5">{{cite book |author=Powell, Gary N. |title=Understanding financial management: a practical guide |publisher=Blackwell Pub |location=Cambridge, MA |year=2005 |page=59 |isbn=0-631-23100-5 }}</ref> | |||
Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. | |||
==References== | |||
{{Reflist}} | |||
==External links== | |||
*http://www.investopedia.com/terms/f/fixed-asset-turnover.asp | |||
*http://www.businessdictionary.com/definition/fixed-asset-turnover-ratio.html | |||
*http://www.investopedia.com/university/ratios/operating-performance/ratio1.asp | |||
[[Category:Economics terminology]] | |||
[[Category:Financial ratios]] | |||
{{business-term-stub}} | |||
Latest revision as of 17:00, 16 July 2013
Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.
References
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External links
- http://www.investopedia.com/terms/f/fixed-asset-turnover.asp
- http://www.businessdictionary.com/definition/fixed-asset-turnover-ratio.html
- http://www.investopedia.com/university/ratios/operating-performance/ratio1.asp
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