How is the Fixed Asset Turnover Ratio computed using patient service revenue and high-tech equipment costs?

The Fixed Asset Turnover Ratio is a measure of how efficiently a company is using its fixed assets to generate revenue. In the context of healthcare, high-tech equipment is often considered a significant fixed asset. The correct computation for the Fixed Asset Turnover Ratio is achieved by dividing total patient service revenue by high-tech equipment costs.

This calculation effectively shows how many dollars of revenue are generated for each dollar invested in high-tech equipment. It reflects the efficiency of the healthcare facility in generating revenue from its investments in fixed assets like medical equipment, which are crucial for delivering patient care.

When using patient service revenue, the focus is on the income generated directly from the core operations, which aligns with the purpose of assessing asset utilization. This method provides a clear picture of revenue generation relative to the costs incurred for vital assets necessary for providing healthcare services.