A declining fixed asset turnover ratio can be caused by acquiring additional assets in the current period in anticipation of increased revenue in the future.

Question

Quizplus · Accepted Answer

Fixed asset turnover ratio = Net revenue ÷ Average net fixed assets
The denominator uses the value of average net fixed assets (property and equipment)over the same period as the revenue in the numerator.If additional assets are acquired,the denominator will increase causing the ratio to decrease.

A Declining Fixed Asset Turnover Ratio Can Be Caused by Acquiring