What is Fixed Asset Turnover Ratio?
The fixed asset turnover ratio measures how efficiently a company uses its fixed assets to generate revenue. It is calculated as revenue divided by average net fixed assets. A higher ratio means the company produces more sales from each riyal of property, plant and equipment.
How It Works
- Take revenue from the income statement.
- Take average net fixed assets from opening and closing balance sheets.
- Divide revenue by average fixed assets.
- Compare against industry peers.
Saudi Context
Capital-intensive Saudi sectors like petrochemicals and utilities naturally show lower fixed asset turnover than asset-light service businesses.
Example
If revenue is SAR 200 million and average net fixed assets are SAR 100 million, fixed asset turnover is 2x, meaning each SAR of fixed assets generates SAR 2 of revenue.