Skip to main content


Can you beat the experts in this safety quiz? Take the challenge

How to Calculate PPE Turnover

By Avetta Marketing
April 16, 2021
4 minutes
How to Calculate PPE Turnover

PPE turnover ratio, or fixed asset turnover, tells you how many dollars of sales your company receives for each dollar invested in property, plant and equipment (PPE). How to calculate PPE turnover depends on all three of these assets. In other words, this formula is used to understand how well the company is using their equipment to generate sales.  

For investors and stakeholders this is extremely crucial because they want to make sure that there’s an approximate measure for return on their investment. Credit lenders also look at PPE turnover ratio to make sure the company can produce enough revenue from a new piece of equipment and then in return pay back the loan they used to purchase it. 

Calculating the PPE Turnover ratio 

The fixed asset turnover ratio formula is calculated by dividing net sales by the total property, plant and equipment net of accumulated depreciation

Image removed. 

Because using the gross equipment values would be misleading, it’s recommended to use the net asset value that’s reported on the balance sheet by subtracting the accumulated depreciation from the gross. 

Businesses often purchase and sell equipment throughout the year, so it’s common for investors and credit lenders to use an average net asset figure for the denominator by adding the beginning balance to the ending balance and dividing by two. 

Low vs. high turnover ratio – what do they mean? 

A high turnover indicates that assets are being use efficiently and large amount of sales are generated using a small amount of assets.  

Additionally, it could mean that the company has sold off its equipment and started to outsource its operations. Outsourcing would maintain the same amount of sales but decrease the investment in equipment at the same time. 

A low turnover indicates that the company isn’t using its assets to their fullest extent. This could be due to a variety of factors such as:  

  • producing items that no one wants to buy 

  • overestimating the demand for their product and overinvesting in the equipment to produce them  

  • manufacturing problems occurs like a bottleneck in the value chain that held up production and resulted in fewer than anticipated sales 

How to increase PPE Turnover ratio 

  1. Increase sales: your equipment may be producing more products than you can sell in a reasonable time. Find ways to move those products more quickly, including discounting bulk purchases, holding sales on old products or initiating promotional campaigns. 

  1. Improve efficiency: examine all the ways your property, plant and equipment are being used and improve the output you get from those assets.  

  1. Sell your assets: for assets you don’t use or only use occasionally, it may be best to sell these because they do not produce any income for your business. Sell any fixed assets that do not improve your profit margin on a regular basis and lease equipment to make up for the sold assets. 

  1. Accelerate collections: if you count sales at the same time you collect money from customers, you may not be collecting quickly enough. This will keep your sales figure low during any given period, so it’s important to find ways to collect more quickly. 

  1. Computerise inventory and order systems: to improve efficiency, analyse how products move through your company to the customer. You can do this by computerising your orders, inventory and billing so that you can improve cash flow. 

To learn more about improving efficiency in your supply chain visit our website, call +1 844-633-3801, or email [email protected]

Subscribe to our Blog

More from the Avetta Blog

Contractor Management, C-Suite, Facilities, Health & Safety, Operations, Procurement, Risk Management, Sustainability, Other
September 15, 2021
Contractor Management, C-Suite, Facilities, Health & Safety, Insurance, Legal, Operations, Procurement, Risk Management, Sustainability, Other
September 9, 2021
Contractor Management, C-Suite, Facilities, Health & Safety, Insurance, Legal, Operations, Procurement, Risk Management, Sustainability, Other
September 1, 2021
Contractor Management, C-Suite, Facilities, Health & Safety, Operations, Sustainability
July 26, 2021
Upcoming Events
November 04, 2021 | 1 pm AEDT
Pegasus: Authentic Leadership: Mining Industry APAC
September 20 - 23, 2021
XXII World Congress Safety & Health at Work
September 28 - 29, 2021
Supply Chain 2021: Protecting People & Planet
October 6, 2021 | 2:00pm ET
Biden’s COVID-19 Vaccine Mandate: What You Need to Know
October 11 - 13, 2021
Orlando, FL
NSC Safety Congress & Expo
October 12, 2021 | 1pm ET
Supply Chain Sustainability: Moving From ‘Why’ to ‘How’
Oct 21, 2021 | 12:00pm CT
Surviving Safety: Excelling as a Safety Professional While Maintaining Individual Wellness
November 17 - 18, 2021
ProcureTECH 2021
November 23-25, 2021
Banff, AB
Petroleum Safety Conference