Which of the Following Is True of Asset Turnover Ratio

question 61

Multiple Choice

Which of the following is true of asset turnover ratio?

• A)It measures how efficiently a business uses its sales to finance the assets.
• B)It measures how efficiently a business uses its average total assets to generate sales.
• C)It measures how efficiently a business uses its net profit to finance the assets.
• D)It measures how the ending inventory helps in increasing the value of assets.

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Definitions:

Budgeted Sales

Forecasted revenue figures for a specific period based on projected sales volume and selling price, crucial for financial planning and performance evaluation.

Budgeted Production

The quantity of products that a company plans to produce over a specific period, as outlined in the budgeting process.

Direct Labor-Hours

The cumulative hours that employees engaged in the production process have worked.

Direct Labor Rate

The cost per hour for direct labor involved in producing goods or services.