What ratio is revenue divided by net fixed assets?

Revenue divided by net fixed assets is the fixed asset turnover ratio. It measures how efficiently a business uses long-lived operating assets to generate sales.

The numerator is usually net sales or revenue for a period. The denominator is commonly average net fixed assets—the beginning and ending net balances averaged together—rather than only the closing balance. Net fixed assets generally include property, plant and equipment after accumulated depreciation.

A higher ratio means the company generates more revenue for each unit invested in fixed assets, although a very high figure can also indicate aging or heavily utilized equipment. A falling ratio may suggest overinvestment, weak demand or recently acquired assets that have not yet produced their expected sales.

The ratio varies naturally by industry. Retailers may turn assets rapidly, while manufacturers, utilities and transportation companies often require substantial plants, vehicles or machinery. It should not be confused with total asset turnover, whose denominator includes current assets and other assets, or working capital turnover, which focuses on current operating capital.