If Pizza Pizza Reports an Asset Turnover Ratio of 2

question 25

Multiple Choice

If Pizza Pizza reports an asset turnover ratio of 2.34 for 2013 and their competitor Pizza Hut reports 3.79 for their 2013 ratio, it means which of the following?

• A) Pizza Pizza is less able to pay off their current obligations with their current assets.
• B) Pizza Pizza is better able to pay their current obligations with their current assets.
• C) Pizza Pizza has been less effective in managing the use and level of its assets.
• D) Pizza Pizza has been more effective in managing the use and level of its assets.

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Definitions:

Weighted Average Method

A cost accounting method that calculates the cost per unit of inventory by considering the weight of each period’s inventory cost.

Weighted Average Method

An inventory costing method that assigns an average cost to each unit in inventory, calculated by dividing the total cost of goods available by the total units available.

Equivalent Units

A term used in cost accounting to represent a partial completion of a product, measured in units of a fully completed product.

Weighted Average Method

An inventory costing method that assigns an average cost to each item based on the total cost of goods available for sale and the number of items available.