# Idea of Fixed Asset Turnover Explained With a Streamlined Formula

In the field of accounting, measurement of performance of a firm is often done by fixed asset turnover ratio formula. Here, some important concepts regarding the turnover ratio, and its basic formula are provided.

Scholasticus K

Last Updated: Jun 3, 2018

Concept of Turnover Ratio

The conception of the turnover ratio lies in the general principles of cost and works in accounting and financial planning. First let us understand the basic purpose of this ratio; it is calculated in order to determine whether a given fixed asset is being utilized fully to best possible extent.

The general formula goes as:

*sales / value of asset(s)*

Formula and Calculation

The most precise formula for fixed asset turnover is: net sales / net value of fixed assets

where: net sales = total sales (-) taxes and other related expenditures and,

net value of assets = cost price or purchase price of the fixed asset (-) depreciation (-) taxes and related expenditures.

where: net sales = total sales (-) taxes and other related expenditures and,

net value of assets = cost price or purchase price of the fixed asset (-) depreciation (-) taxes and related expenditures.