Question

The fixed-asset turnover ratio is calculated as ______ divided by average fixed assets?

1) net income
2) current assets
3) total assets
4) net sales

Answer 1

The fixed-asset turnover ratio is calculated by dividing net sales by average fixed assets, which indicates how efficiently a company uses its fixed assets to generate sales.

Step-by-step explanation:

The fixed-asset turnover ratio is calculated by dividing net sales by average fixed assets. This financial metric is used to evaluate how efficiently a company is using its fixed assets to generate sales. More specifically, it shows how many dollars of sales a company generates for every dollar invested in fixed assets. Remember, the fixed assets are long-term resources like property, plant, and equipment that a company uses in its production process. To calculate the average fixed assets, you would typically take the fixed assets at the beginning of the period plus the fixed assets at the end of the period and divide by two.