Fixed Asset Turnover Calculator
Calculate sales generated per dollar of fixed assets
Fixed Asset Turnover Formulas
Understanding Fixed Asset Turnover
Fixed Asset Turnover (FAT) measures how efficiently a company uses its property, plant, and equipment (PP&E) to generate sales. A FAT of 3.0 means each dollar of fixed assets generates $3 in sales annually.
Net fixed assets (after accumulated depreciation) are used because they represent the current book value of productive capacity. Gross assets would overstate the denominator for older companies.
FAT varies dramatically by industry. Asset-light businesses like software have very high FAT; capital-intensive industries like utilities have low FAT. Always compare within industry.
FAT Interpretation
High FAT (>4)
Efficient asset use. Asset-light model or well-utilized capacity.
Moderate FAT (2-4)
Normal for manufacturing. Reasonable asset utilization.
Low FAT (1-2)
Capital-intensive industry. Common for heavy industry, utilities.
Very Low FAT (<1)
Underutilized assets or infrastructure business. Investigate.
Industry Benchmarks
| Industry | Typical FAT | Interpretation | Notes |
|---|---|---|---|
| Software/Tech | 5-15x | Asset-light | Minimal PP&E |
| Retail | 3-6x | Moderate assets | Store fixtures |
| Manufacturing | 2-4x | Factory/equipment | Varies by type |
| Airlines | 0.5-1.5x | Fleet-heavy | Massive PP&E |
| Utilities | 0.3-0.6x | Infrastructure | Regulated returns |
Improving Fixed Asset Turnover
Increase Sales
More revenue from existing assets improves FAT. Maximize utilization.
Optimize Capacity
Run multiple shifts, reduce downtime, improve maintenance. Sweat your assets.
Right-Size Assets
Sell or redeploy underperforming assets. Don't overbuild capacity.
Consider Leasing
Operating leases keep assets off balance sheet (pre-IFRS 16). May improve FAT.
Frequently Asked Questions
Why use net fixed assets instead of gross?
Net fixed assets (after depreciation) represent current productive capacity. Gross assets would make older, fully depreciated equipment look the same as new equipment, distorting comparisons.
What causes FAT to decline?
Major capital investments increase fixed assets before sales catch up. Also: capacity underutilization, sales decline, or shift to asset-heavy operations. Check the cause before judging negatively.
How does depreciation method affect FAT?
Accelerated depreciation reduces net fixed assets faster, inflating FAT vs straight-line. When comparing companies, check depreciation policies. Use gross assets for comparability if needed.
Should intangibles be included?
Fixed Asset Turnover traditionally uses tangible PP&E only. Including intangibles changes the ratio significantly. For total asset efficiency, use Total Asset Turnover instead.
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