Thesis: The Fixed Asset Turnover Ratio

Sample Thesis Paper

The Fixed Asset Turnover Ratio is calculated by dividing revenue by total fixed assets which may include property, plant, machinery and equipment. This ratio shows the productive performance of a company in relation to using their fixed or noncurrent assets to create sales. It is highly beneficial to monitor this ratio to analyze how well a company is using its fixed assets for the purpose of increasing sales.

This ratio obviously is better for the company if it is higher and worse if it is on the lower side. The Fixed Asset Turnover ratio, like most other ratios, in itself is not enough to gauge the performance of a company. It has to be compared to the ratios of the preceding periods or to companies in the same industry or the industry standards. It is also important to understand that fixed assets are different in magnitude and stature in different industries. In internet companies, for instance, fixed assets are very low as compared to manufacturing companies where fixed assets are significantly higher. This affects the relevance of this ratio (Stickney and Weil 2004).

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