Which of the Following Could Explain a Decrease in Net

question 22

Multiple Choice

Which of the following could explain a decrease in net operating asset turnover for a company?

• A)Switching from straight line to accelerated depreciation for financial reporting purposes
• B)An increase in the financial leverage of the company
• C)Addition of a new plant for production purposes
• D)Decrease cost of production inputs

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Definitions:

Business Days

Days of the week excluding weekends and public holidays, typically Monday through Friday, when business operations are conducted.

Fixed Charge Coverage

A financial metric evaluating how well a company can pay off its fixed expenses, like interest and leases, using its earnings before interest, taxes, depreciation, and amortization (EBITDA).

Times Interest Earned Ratio

A measure of a company's ability to meet its interest obligations, calculated as earnings before interest and taxes divided by interest expense.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing or repurchasing equity and debt.