The fiXed Asset Turnover Ratio Is Computed by Dividing Profit

question 45

True/False

The fixed asset turnover ratio is computed by dividing profit by the average fixed assets amount.

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Definitions:

MM Model

Modigliani-Miller Model; a theory on capital structure that suggests the market value of a firm is determined by its earning power and the risk of its underlying assets.

Tax-Deductibility

Pertains to expenses that can be subtracted from gross income to reduce the total taxable income, thereby lowering the amount of tax owed.

Financial Leverage

Engaging borrowed assets to increase the anticipated yield from an investment.

Operating Leverage

The degree to which a company uses fixed operating costs, where a higher degree indicates that a small change in sales will have a larger impact on operating income.