Above Are Portions of the Balance Sheet and Income Statement

question 23

Multiple Choice

Above are portions of the balance sheet and income statement for two companies in 2008. Based upon this information, which of the following statements is most likely to be true?

• A) Asset turnover ratios indicate that firm A is generating greater revenue per dollar of assets than firm B.
• B) Fixed asset turnover ratios indicate that firm A generating fewer sales for the assets it employs than firm B.
• C) Both asset turnover ratios and fixed asset turnover ratios indicate that firm A is generating greater revenue per dollar of assets than firm B.
• D) Fixed asset turnover ratios indicate that firm A generating more sales for the assets it employs than firm B.

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Definitions:

Future Years

Refers to the period of time that lies ahead, used in planning, forecasting, or projecting financial and operational activities.

Plant Asset

Long-lived tangible assets used in the production and distribution of goods and services, such as machinery and equipment.

Systematic

Methodical in procedure or plan; carried out using step-by-step methods leading to predictable outcomes.

Service Life

The estimated period over which a fixed asset is expected to be usable by the entity, impacting its depreciation calculation.