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

Business

Erik

27 April, 21:00

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.

+5

Answers (1)

Know the Answer?

Maddox Hardy · 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