How Efficient is the Company in Utilizing its Fixed Assets?

What is the company's fixed asset turnover ratio for 2021?

a. 17.68

b. 1.68

c. 1.00

d. 1.47

e. None of the above.

The company's fixed asset turnover ratio for 2021 is 1.47.

The average value of property, plant and equipment for 2021 is ($2.6 million + $3.1 million) / 2 = $2.85 million.

The fixed asset turnover ratio measures the efficiency with which a company utilizes its fixed assets to generate sales revenue. It is calculated by dividing net sales revenue by the average value of fixed assets.

To calculate the average value of fixed assets, we add the beginning and ending values of property, plant and equipment and divide the sum by 2. In this case, the average value of property, plant and equipment for 2021 is ($2.6 million + $3.1 million) / 2 = $2.85 million.

Next, we divide the net sales revenue of $4.2 million by the average value of fixed assets ($2.85 million) to calculate the fixed asset turnover ratio: $4.2 million / $2.85 million = 1.47.

Therefore, the company's fixed asset turnover ratio for 2021 is 1.47.

← Construction contracts calculating percentage of completion and revenue recognition How to make decisions on large expenditures →

More Posts: