A fiXed Asset Turnover Ratio of

question 71

Multiple Choice

A fixed asset turnover ratio of .72 means that:

• A) For every $1 in total assets, a firm can generate $0.72 in net income.
• B) For every $1 in net fixed assets, a firm can generate $0.72 in net income.
• C) For every $1 in total assets, a firm can generate $0.72 in sales.
• D) For every $1 in net fixed assets, a firm can generate $0.72 in sales.
• E) For every $1 in net fixed assets, a firm can obtain $0.72 in debt.

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Definitions:

Accounts Receivable Balance

The total amount of money owed to a company by its customers for goods or services provided on credit, yet to be paid.

Accounts Receivable Period

The average number of days it takes for a business to collect payments owed by its customers.

Credit Sales

Sales made by a business for which payment is received at a later date, extending credit to the buyer.

Cash Collections

are the payments received by a company from its customers in exchange for goods or services sold on credit.