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Query

13 January 2013

A firm having old plant and machinery has a higher FA turnover ratio then a firm having new plant and machinery. Why is it so?

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3 Replies

shikhar (LEARNER ) (1394 Points)
Replied 13 January 2013

Friend, Fixed assets turnover ratio= TURNOVER/FIXED ASSETS

Old fixed assets are more depreciated then compare to new fixed assets.

if we take an example of a company X ltd and y ltd having similar sale of Rs 600000. And having fixed assets of 200000(old)in x Ltd and 300000(new) in y Ltd THE ASSTS TURN OVER RATION WILL BE 3 for X and 2 for Y

because the denominator (fixed assets) is less in Company X Ltd due to depreciation of Fixed Assets as compare to Y Ltd.

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CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 13 January 2013

Originally posted by : shikhar
	Friend, Fixed assets turnover ratio= TURNOVER/FIXED ASSETS Old fixed assets are more depreciated then compare to new fixed assets. if we take an example of a company X ltd and y ltd having similar sale of Rs 600000. And having fixed assets of 200000(old)in x Ltd and 300000(new) in y Ltd THE ASSTS TURN OVER RATION WILL BE 3 for X and 2 for Y because the denominator (fixed assets) is less in Company X Ltd due to depreciation of Fixed Assets as compare to Y Ltd.

AGREED AS THE DENOMINATOR KEEPS ON DECREASING THE ANS IN NUMEROTOR WILL KEEP INCREASING IF TURNOVER ALSO KEEPS INCREASING...PROPERLY EXPLAINED IN ABOVE EG.