AE2
Fixed Asset Turns
The Fixed Asset Turns is a ratio that measures a company's ability to generate net sales from the investments made in Property, Plant And Equipment (PP&E), net of depreciation.
Calculation
| Fixed Asset Turns | |||
| = |
| ||
where:
- Revenue = Total annual supply chain revenue
- Net Fixed Asset Value = Average value of Net Fixed Assets (Gross Fixed Asset - Accumulated depreciation) during the year (= average of beginning and year-end net fixed assets value)
Unit of measure: Number of turns
Importance
A larger number of turns indicates that the company is making more effective use of its existing assets. A lower ratio is an indicator either of low sales or that the business has over-invested in property or equipment that isn't benefiting the bottom line.
In order to understand what constitutes good or bad Fixed Asset Turns this metric should always be compared to industry standards and the ratios of other companies that are similar in size. An equipment-heavy company, such as an industrial equipment manufacturer, has an inherently higher fixed asset total.
Notes
Alternative names for this metric include Return on Fixed Assets, Fixed Asset Turnover Ratio.
Community Importance Rating:
Hierarchy
| ID | Name | Level | x |
|---|---|---|---|
| AE | Asset Efficiency | 0 | AE |
| AE2 | Fixed Asset Turns | 1 | AE2 |
| AE21 | Gross Fixed Assets | 2 | AE21 |
| AE22 | Asset Depreciation Ratio | 2 | AE22 |
Term(s)
| ID | Name | Clear | x |
|---|---|---|---|
| IFRS | International Financial Reporting Standards | IFRS | |
| PP&E | Property, Plant & Equipment | PP&E |