Is the fixed asset turnover ratio more relevant in the analysis of McDonald’s Corporation or General Motors Corporation? Why?
The fixed asset turnover ratio is more relevant in analyzing GM, since it is more capital intensive than McDonald’s. However, McDonald’s does use fixed assets to produce and sell its products and the ratio is relevant to analyzing that company as well. In general, the relevance (and validity) of this ratio is a function of the role played by fixed assets in the company’s activities. For a company with few fixed assets for example, an accountant who works at home this ratio becomes meaningless.