The smaller the fixed asset turnover ratio is the lower the investment in property, plant and equipment.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated by dividing net sales by the average value of property, plant, and equipment. A lower ratio indicates that a company is generating fewer sales relative to its investment in fixed assets. Therefore, a company with a smaller fixed asset turnover ratio is likely to have a higher investment in property, plant and equipment.

The Smaller the Fixed Asset Turnover Ratio Is the Lower