Although we do not observe a firm's plant and equipment physically turning over, fixed asset turnover is intended to determine the capacity of the firm's fixed assets to generate sales revenue.

Question

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Fixed asset turnover is a financial ratio that measures how efficiently a company uses its fixed assets to generate revenue. It is calculated by dividing net sales by the net book value of fixed assets. Therefore, it is an indicator of a company's ability to generate revenue from its investments in property, plant, and equipment.

Although We Do Not Observe a Firm's Plant and Equipment