If a firm's fixed assets turnover ratio is significantly higher than its industry average,this could indicate that it uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets.

Question

Quizplus · Accepted Answer

A higher fixed assets turnover ratio indicates that the firm is generating more revenue per dollar of fixed assets, which implies that the firm is using its fixed assets efficiently. It does not necessarily mean that the firm is operating at overcapacity and needs to add fixed assets.

If a Firm's Fixed Assets Turnover Ratio Is Significantly Higher