We can use the fixed asset turnover ratio to legitimately compare firms in different industries as long as all the firms being compared are using the same proportion of fixed assets to total assets.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated by dividing sales by fixed assets. Since different industries require different levels of investment in fixed assets, it would not be appropriate to compare the fixed asset turnover ratio of firms in different industries. Additionally, the fixed asset turnover ratio does not consider the effects of depreciation, so it may not provide an accurate measure of a company's efficiency.

We Can Use the Fixed Asset Turnover Ratio to Legitimately