Is your business making the most of its investments in property, plant, and equipment? The fixed asset turnover ratio could hold the answer—and in 2025, it’s more relevant than ever for Australian companies.
What Is the Fixed Asset Turnover Ratio?
The fixed asset turnover ratio (FATR) measures how efficiently a business uses its fixed assets—like buildings, machinery, and vehicles—to generate sales. It’s calculated as:
- Fixed Asset Turnover Ratio = Net Sales / Average Net Fixed Assets
For example, if a Sydney-based manufacturer reports $5 million in sales and holds $2 million in average net fixed assets, their FATR is 2.5. This means the business generates $2.50 in sales for every $1 invested in fixed assets.
Why the Fixed Asset Turnover Ratio Matters in 2025
With the Australian economy navigating a mix of supply chain pressures and digital transformation, capital efficiency is in the spotlight. The 2025 federal budget introduced new incentives for asset write-offs and investment in green technology, making it vital for CFOs and business owners to track how well these assets are performing.
- Capital-Intensive Industries: Sectors like mining, manufacturing, and logistics depend heavily on fixed assets. A declining FATR could signal outdated equipment or over-investment.
- SMEs & Startups: With tighter access to business finance in 2025, smaller firms need to squeeze maximum value from every asset.
- ESG & Sustainability: New reporting standards require companies to demonstrate efficient use of resources, making FATR part of broader ESG metrics.
Australian businesses that ignore this ratio risk falling behind competitors who are using data-driven insights to make smarter investment choices.
How to Calculate and Interpret the Ratio
To get the most out of the fixed asset turnover ratio, follow these steps:
- Find Net Sales: This is your total revenue minus returns, allowances, and discounts.
- Calculate Average Net Fixed Assets: Add the opening and closing net fixed asset values for the period, then divide by two.
- Apply the Formula: Divide net sales by average net fixed assets.
What’s a Good Ratio? It varies by industry. For example, in 2025, Australian food manufacturers average around 3.0, while capital-heavy mining firms might see ratios closer to 1.0. A high ratio suggests efficient asset use; a low ratio could point to underutilisation or recent large investments yet to pay off.
Red Flags:
- A sudden drop in FATR may indicate sales problems or idle equipment.
- Consistently low ratios compared to industry benchmarks could signal the need to divest or upgrade assets.
Boosting Your Fixed Asset Turnover Ratio in 2025
Australian businesses looking to improve this key metric should consider:
- Asset Management: Regularly review your asset register for underperforming or obsolete equipment. The government’s expanded instant asset write-off scheme in 2025 can help free up capital.
- Smart Investment: Prioritise tech upgrades that automate production or logistics, boosting sales without ballooning your asset base.
- Outsourcing & Leasing: Leasing equipment or using asset-light models can raise your FATR by keeping the asset base lean.
- Sales Strategy: Focus on increasing revenue from existing assets—cross-selling, value-added services, or entering new markets.
For example, a Brisbane logistics firm that switched to electric delivery vehicles in 2025 accessed government rebates, improved its ESG profile, and boosted its FATR by increasing delivery efficiency with fewer vehicles.
Conclusion
The fixed asset turnover ratio is more than just a number—it’s a window into how well your business is converting investment into growth. With new policy changes and technology trends shaping Australia’s financial landscape in 2025, now is the time to put this ratio on your radar. Regularly tracking and improving your FATR can sharpen your competitive edge and maximise returns on every dollar invested.
