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:

High-Low Method

A mathematical method that uses the total costs incurred at the high and low levels of activity to classify mixed costs into fixed and variable components.

Mixed Cost

A cost composed of a fixed and a variable component and changes in total with the level of activity, but not proportionally.

Variable

An element, feature, or factor that is liable to change or be changed, often used in the context of experiments, statistics, or mathematics.

Mixed Costs

Costs that contain both a variable- and a fixed-cost element and change in total but not proportionately with changes in the activity level.