Which Ratio Measures How Effectively a Company Is Using Assets

question 12

Multiple Choice

Which ratio measures how effectively a company is using assets to generate revenue?

• A)Net margin
• B)Plant assets to long-term liabilities
• C)Asset turnover
• D)Inventory turnover

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Definitions:

Perpetual Inventory System

A method of accounting for inventory that records real-time transactions of goods as they come in and out of stock, thus maintaining a continuously updated inventory balance.

Periodic System

A method of inventory valuation for financial statements where purchases during the period are recorded directly to an inventory account and the cost of goods sold is determined at the end of the accounting period.

Purchase Discounts

A reduction in the purchase price, allowed by the seller to encourage early payment by the buyer.