Which of the Following Statements Is Inaccurate with Respect to the Total

question 1

Multiple Choice

Which of the following statements is inaccurate with respect to the total asset turnover ratio?

• A) It is calculated as sales revenues divided by total assets at year-end.
• B) It is decreased when additional plant and equipment is purchased.
• C)A high ratio implies efficient management of assets.
• D)It is decreased when additional inventory is purchaseD.Total Asset Turnover = Sales (or Operating) Revenues/Average Total Assets.

Appreciate the impact of inaccurate sales forecasting on inventory and production planning.

Determine the total direct labor and materials costs based on budget data.

Understand the importance of maintaining desired inventory levels to meet production needs.

Recognize the relationship between budgeting and strategic planning.

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Definitions:

Prepaid Rent

An expense that is paid in advance for the use of property or equipment, which is then recognized as an expense over the period of use.

Rent Expense

The cost incurred from renting property or equipment, recognized as an expense on the income statement.

Accounts Receivable

Money owed to a business by its customers for products or services delivered on credit.

Significant Accounting Policies

The specific accounting principles and methods of computation adopted by a business to prepare its financial statements, reflecting its transactions in a consistent manner.