Tangible fixed assets turnover

Method of calculation

Formula for tangible fixed assets turnover (productivity of tangible fixed assets): net revenues from sales / tangible fixed assets

Ratio's description

Tangible fixed assets turnover ratio describes the effectiveness of tangible fixed assets management in the company. High ratio's values indicate that the cash invested in tangible fixed assets produce high levels of revenues from sales. While assesing the ratio some care should be taken – high values of the ratio may result from the low level of tangible fixed assets, which are worn and amortized to a large extent (thus it is also worth to assess the quality of fixed assets).

Ratio's interpretation

  • When assessing the changes in ratio's value over time (over few periods):
    • the increase of ratio's value is interpreted as an improvement of tangible fixed assets use (provided that this increase does not only result from the growing wear of tangible fixed assets),

       

    • the decrease of ratio's value is interpreted as a deterioration of tangible fixed assets use, which is assessed negatively.