What is Fisher Effect ( Definition, formula ) - PowerPoint PPT Presentation

About This Presentation
Title:

What is Fisher Effect ( Definition, formula )

Description:

The economist Irving Fisher constructed a theory which is now referred to as the Fisher Effect, which depicts the relationship which is following between. Read here full blog- – PowerPoint PPT presentation

Number of Views:25
Slides: 8
Provided by: financeninsurance
Category: Other

less

Transcript and Presenter's Notes

Title: What is Fisher Effect ( Definition, formula )


1
(No Transcript)
2
Finance N Insurance
What Is the Fixed Asset Turnover Ratio
The fixed asset turnover ratio is basically a
measuring tool used by the companies to analyze
or judge that how well the companys assets are
functioning to produce or bring in the revenue or
sales for the company. Moreover, the Investors
and creditors also use the Fixed Asset Turnover
Ratio to know the sales of the company. Investors
measure the return on their investments which are
invested in the company, whereas the creditors
make sure that the company is in a position to
pay off its debts.
3
Fixed Asset Turnover Ratio Formula
  • The formula used for calculating the Fixed Asset
    Turnover Ratio is stated as follows
  • ? Fixed Asset Turnover Ratio or FAT Net Sales /
    Average Fixed Assets
  • ?Where in the above FAT formula
  • the Net Sales Gross sales returns, and the
    allowances
  • the Average Fixed Assets NABB - Ending Balance
    / 2
  • ?the NABB the Net fixed assets commencement
    balance?
  • And the net fixed assets formula ((Total of the
    Fixed Assets Total of the Current Assets)
    (Total of the Current Liabilities Total of the
    Extended Period Liabilities))
  • The higher fixed asset turnover ratio shows that
    the company is using its assets in the desired
    and utmost way in order to generate sales for the
    company

4
The Fixed Asset Turnover Ratio and the Asset
Turnover Ratio Difference
  • While calculating the Asset Turnover Ratio we
    make use of the total assets, whereas in the
    calculation of the Fixed Asset Turnover Ratio,
    only fixed assets are used.
  • The formula for the same (Fixed Asset Turnover
    Ratio) applies as
  • ? Fixed Asset Turnover Ratio or FAT the Net
    Sales / Average Fixed Assets
  • And the formula for the Asset Turnover Ratio is
    as
  • Fixed asset turnover ratio Net annual sales
    (Gross fixed assets Accumulated depreciation)

5
What does Fixed Asset Turnover Ratio indicate?
  • High Fixed Asset Turnover Ratio
  • A High Fixed Asset Turnover Ratio indicates
    competence or the productivity of the business to
    manage the fixed assets of the business. So, a
    high Fixed Asset Turnover Ratio is preferred by
    most of the business as it brings profitability
    to the business by providing higher returns in
    the business.
  • Low Fixed Asset Turnover Ratio
  • A low Fixed Asset Turnover Ratio indicates
    inadequacy or wastefulness of the professional to
    manage the fixed assets of the business. So, a
    high Fixed Asset Turnover Ratio is not preferred
    by most of the business as it shows that the
    amount invested in the immovable assets of the
    business is more than the return they are
    producing. Moreover, a low or decreased ratio
    indicated that a company or business is investing
    more in the fixed assets than the desired.

6
How can you Improve the Fixed Asset Turnover
Ratio?
  • There exist certain ways in which you can improve
    your Fixed asset turnover ratio some of which are
    as follows
  • Revenue to be increased you need to focus on the
    revenue of the company or the business in order
    to attain profits, which will eventually increase
    the Fixed asset turnover ratio.
  • Discharge the non-usable assets the old, as well
    as the non-usable assets, should be discharged
    off from the company as they will hamper the
    production of the business and eventually bring
    impact on the sales of the company.
  • Lease the assets You can also give your assets
    on lease which will bring revenue to the company
    or the business.
  • Improve your inventory management you need to
    keep a track of all your inventory and make sure
    that the working of inventory is working at its
    pace, as it hampers the sales of the product to
    the ultimate consumer.

7
  • Thank you for Reading
Write a Comment
User Comments (0)
About PowerShow.com