A Total Asset Turnover Ratio of 3

question 47

Multiple Choice

A total asset turnover ratio of 3.5 indicates that:

• A) For every $1 in sales, the firm acquired $3.50 in assets during the period.
• B) For every $1 in assets, the firm produced $3.50 in net sales during the period.
• C) For every $1 in assets, the firm earned gross profit of $3.50 during the period.
• D) For every $1 in assets, the firm earned $3.50 in net income.
• E) For every $1 in assets, the firm paid $3.50 in expenses during the period.

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Definitions:

Financial Risk

The possibility of losing financial capital or value, including the risks from market movements, credit risk, liquidity risk, and operational risks faced by investors or companies.

Debt Financing

Raising capital through the sale of bonds, loans, or other notes to individuals or institutions.

Return on Assets

A financial ratio indicating how profitable a company is relative to its total assets.

Weighted Average Cost of Capital

An average representing the expected return on all of a company's securities, weighted according to the proportion each contributes to the total capital structure.