Fixed Asset Turnover Ratio: Application to Real Estate
What is a Fixed Asset Turnover Ratio?
The Fixed Asset Turnover Ratio (FATR) measures how efficiently a company generates revenue from its fixed assets, calculated as:
Application in Real Estate
In real estate, fixed assets include properties, buildings, and land, while revenue comes from rental income, property sales, or management fees. A higher ratio indicates efficient asset utilization, while a lower ratio may signal underutilized properties or excessive capital investment.
For example, a commercial real estate firm with $10M in property assets generating $2M in annual rental income has an FATR of 0.2, meaning each dollar invested in real estate produces $0.20 in revenue. Investors and lenders use this metric to assess property performance, asset efficiency, and capital allocation.
