Step 3: Finally, the formula for the fixed asset turnover ratio can be derived by dividing net sales (step 1), as shown below, by the average net fixed assets (step 2).įixed Asset Turnover Ratio = Net Sales / Average Net Fixed Assets Relevance and Use of Fixed Asset Turnover Ratio Formula Now, compute the average net fixed assets for the given period based on the opening and closing value of the net fixed assets.Īverage Net Fixed Assets = (Opening Net Fixed Assets + Closing Net Fixed Assets) / 2 Step 2: Next, the value of net fixed assets of the company at the beginning of the period (opening) and at the end of the period (closing). Step 1: Firstly, determine the value of the net sales recognized by the company in its income statement for the given period. The formula for Fixed Asset Turnover Ratio can be calculated by using the following steps: Calculate Apple Inc.’s fixed assets turnover ratio based on the given information. During the year, the company booked net sales of $260,174 million, while its net fixed assets at the start and end of 2019 stood at $41,304 million and $37,378 million respectively. Let us take Apple Inc.’s example now’s the annual report for the year 2019 and illustrate the computation of the fixed asset turnover ratio. Fixed Asset Turnover Ratio Formula – Example #2 was more effective in the use of its fixed assets during 2019. Therefore, XYZ Inc.’s fixed asset turnover ratio is higher than that of ABC Inc. Fixed Asset Turnover Ratio = $70 million / $24 million.Fixed Asset Turnover Ratio = $50 million / $22 million.Average Net Fixed Assets = ($22 million + $26 million) / 2įixed Asset Turnover Ratio is calculated using the formula given belowįixed Asset Turnover Ratio = Net Sales / Average Net Fixed Assets.
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