It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only all the firms being compared have the same proportion of fixed assets to total assets. a) trueb) false

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Beatrice Shah

Business

Today, 16:05

It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only all the firms being compared have the same proportion of fixed assets to total assets. a) trueb) false

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Jamal Jenkins · Answer 1

False

Explanation:

fixed assets turnover ratio = net sales / average fixed assets

This ration measures how effectively a company uses its fixed assets to generate sales. If a company's fixed assets turnover ratio is higher than the industry average, it means that it is using its assets more efficiently to generate more sales or it is working at an over capacity, and it needs to add more fixed assets.