Answers the Question
How efficiently is profit being generated?
Calculator for Fixed Asset Turnover
What Is the Fixed Asset Turnover?
This formula examines how much money needs to be invested (in the form of capital) in order to generate a quantity of profit.
Why Is it Important?
- The more resources that are required to earn a profit, the less valuable the investment. Having a formula that provides a window into capital requirements provides a means for valuing ongoing business processes and (just as importantly) assists investors in determining whether a venture is worthy of investment.
Formula(s) to Calculate Fixed Asset Turnover
- FIXED ASSET TURNOVER = NET SALES / (FIXED ASSETS - ACCUMULATED DEPRECIATION )
- Ignoring strategic benefits of an ongoing concern. A venture that provides little in the way of tangible profits but increases goodwill, customer discovery, or prevents entry into a sector by competitors may well be worth the cost.