The Asset Turnover Ratio

question 244

Multiple Choice

The asset turnover ratio

• A) Is computed by dividing net sales (income statement account) by average total assets (statement of financial position account).
• B) Measures how efficiently a company is using its net sales to purchase and use fixed assets.
• C) Measures how many dollars are invested in fixed assets per dollar of net sales.
• D) All of these answer choices are correct.

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Definitions:

Outstanding Checks

Checks issued by a company that have not yet been cashed or cleared by the bank.

Bank Reconciliation

The procedure of aligning the balances found in an organization's financial records for a cash account with the similar data on a bank statement.

Recorded Incorrectly

Refers to transactions or entries that have been documented in an erroneous manner within the financial records.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.