A Company Has an Asset Turnover Ratio of 1

question 16

Multiple Choice

A company has an asset turnover ratio of 1.15.Which of the following statements is true?

• A)The company generates $1.15 of net income for every $1 in reported assets.
• B)The company buys assets more frequently than it sells them.
• C)The company generates $1.15 of sales revenue for every $1 in reported assets.
• D)This is an improvement over the previous period when the asset turnover rate was 1.7.

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Definitions:

Asset Turnover Ratio

The Asset Turnover Ratio is a financial metric that measures the efficiency of a company in generating sales revenue from its assets.

Return on Assets

This measures how effectively a company uses its assets to generate profit, calculated by dividing net income by total assets.

Disposal

The act of getting rid of an asset through sale, exchange, retirement, or destruction.

Continuing Operations

The segments or activities of a business expected to continue for the foreseeable future, excluding any discontinued operations from financial analysis.