Elevate Fixed Asset Turnover and ROI with CMMS

Manufacturers—from cereal giants like Kellogg’s to precision builders such as Caterpillar, and even boutique producers like Aunt Sadie’s hand‑crafted dryer balls—rely on fixed assets to manufacture and distribute their products.

These assets, whether a corn‑processing plant, an automated assembly line, a fleet of delivery trucks, or a small workshop loom, are capital‑intensive, durable, and essential to a company’s value chain.

Because they are not meant to be sold or retired within a fiscal year, they are recorded on the balance sheet as Property, Plant & Equipment (PP&E) and are typically subject to depreciation.

Tracking PP&E balances can reveal strategic trends. A company that consistently reports negative net cash flow due to large fixed‑asset outlays is likely expanding its production capacity to meet growing demand—buying new processors, robots, warehouses, and vehicles.

The Case for Fixed Assets – and Their Maintenance

Investing in a fixed asset is only the first step; maintaining it is equally critical and often more expensive over the asset’s life. The total cost of ownership includes routine maintenance—scheduled preventive care—and reactive maintenance—unscheduled repairs.

Proactive upkeep is invariably cheaper than reactive fixes. Regular maintenance keeps equipment running smoothly, reduces costly downtime, and protects revenue streams.

Consequently, disciplined maintenance directly improves two key performance metrics: Return on Fixed Assets (RoFA) and Fixed Asset Turnover Ratio (FATR).

Calculating Return on Fixed Assets (RoFA)

RoFA = Operating Income ÷ Total Fixed‑Asset Investment.

For example, if a company generates $5 million in operating income and owns $20 million in fixed assets, its RoFA is 0.25, or 25 %. This means every dollar invested in assets yields 25 cents in profit.

RoFA is a vital indicator for executives, investors, and analysts. Comparing RoFA across periods or against peers highlights profitability trends and the efficiency of asset utilization.

Exploring Fixed Asset Turnover Ratio (FATR)

FATR = Net Sales ÷ Net Fixed Assets.

Higher FATR signals that a company is generating more sales per dollar of fixed‑asset investment, reflecting superior operational efficiency.

While there is no universal benchmark, a company outperforming its competitors on FATR can be confident that its asset base is being leveraged more effectively.

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The Argument for Computerized Maintenance Management

Maintenance management’s goal is to keep fixed assets operating at peak performance, minimizing downtime and controlling costs.

Human planners can overlook tasks, lose parts, or misallocate resources, leading to production disruptions. A modern Computerized Maintenance Management System (CMMS) eliminates these errors by storing all maintenance schedules, spare‑part inventories, and regulatory compliance records in a single, searchable database.

Three core benefits of a CMMS—improved task tracking, data‑driven decision making, and compliance verification—directly boost RoFA and FATR:

• Accurate, real‑time task tracking. Automated alerts and notifications keep preventive maintenance on schedule, reducing the risk of costly breakdowns.
• Strategic insight. Aggregated performance metrics help leaders allocate resources more efficiently, lowering production costs and increasing output.
• Regulatory compliance. A CMMS records every required inspection and service, ensuring that non‑compliance does not trigger costly shutdowns.

In today’s data‑heavy environment, manually compiling maintenance data is simply impractical. Adopt a CMMS to streamline operations, elevate performance, and watch your RoFA and FATR climb.

For an in‑depth look at what a CMMS is, check out our What Is a CMMS System and How Does It Work guide.

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Keith Craig is Content Marketing Manager for Betterbuys. He has more than a decade of experience researching and writing about business software and hardware. He can be found on Twitter and LinkedIn.

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1 Comments

• Maria Joseph N March 7, 2019, 9:29 pm

  While computing fixed asset turnover ratio, the formula is generally Net sales/Fixed Asset. However, there are cases where Cost of sales is used in lieu of Sales in ascertaining Fixed Assets. Can any one clarify the situations where Cost of Sales is used instead of Sales, while computing fixed assets turnover ratio?