If a firm's fixed assets turnover ratio is significantly higher than its industry average, this could indicate that it uses its fixed assets 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 a company is generating more revenue per dollar of fixed assets, which could mean it is using its assets efficiently. However, if the company is operating at overcapacity and cannot meet demand, adding fixed assets may be necessary to maintain efficiency and profitability. Therefore, both factors should be considered before making a decision.

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