Asked by: Badr Spellekenbusiness and finance debt factoring and invoice discounting
Should fixed asset turnover ratio be high or low?
Last Updated: 16th May, 2020
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Considering this, should total asset turnover ratio be high or low?
Higher turnover ratios mean the company is using its assets more efficiently. Lower ratios mean that the company isn't using its assets efficiently and most likely have management or production problems. For instance, a ratio of 1 means that the net sales of a company equals the average total assets for the year.
Furthermore, is it good to have a high fixed asset turnover? While a higher fixed asset turnover ratio is generally better, if the fixed asset turnover ratio is too high, then the business firm is likely operating over capacity and needs to either increase its asset base (plant, property, equipment) to support its sales or reduce its capacity.
People also ask, what is considered a good asset turnover ratio?
An asset turnover ratio of 4.76 means that every $1 worth of assets generated $4.76 worth of revenue. In general, the higher the ratio – the more "turns" – the better. But whether a particular ratio is good or bad depends on the industry in which your company operates.
Is a low asset turnover ratio good?
The higher the asset turnover ratio, the more efficient a company. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.