When a Company Records Fictitious Revenues, What Is the Effect

question 36

Multiple Choice

When a company records fictitious revenues, what is the effect on asset turnover ratio?

• A) The ratio increases
• B) The ratio decreases
• C) No effect
• D) The ratio might increase or decrease depending upon the transaction

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Definitions:

Raw Materials

Basic materials used in the production process, not yet transformed into finished goods.

Finished Product

Goods that have been completed through the manufacturing process and are ready to be sold.

Supply Chain

The network of all the individuals, organizations, resources, activities, and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, and eventually to the end user.

Product or Service

The final output offered by a company to consumers, which can either be a tangible item (product) or an activity benefiting the customer (service).