When using the asset turnover ratio, which of the following is true? a. The ratio measures how effectively a business is using its assets to generate sales. b. The assets used in computing this ratio may be the average of monthly assets. c. A high ratio indicates an effective use of assets. d. All of these choices are true.

Question

Sasha Petersen

Business

9 May, 05:35

When using the asset turnover ratio, which of the following is true? a. The ratio measures how effectively a business is using its assets to generate sales. b. The assets used in computing this ratio may be the average of monthly assets. c. A high ratio indicates an effective use of assets. d. All of these choices are true.

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Answers (1)

Know the Answer?

Lesly Rivera · Answer 1

a business is using its assets to generate sales.

Explanation:

The formula to compute the asset turnover ratio is shown below:

Asset turnover ratio = Net sales : average total assets

where,

Average total assets = (Opening balance of assets + ending balance of assets) : 2

And, the net sales = sales revenue - sales discounts - sales returns

Thus, option A is correct and the rest options are wrong