The asset turnover ratio measures:
A)the profit generated by efficient management of assets.
B)the level of financing risk assumed by the company.
C)the sales revenue generated by efficient management of assets.
D)the ability to earn profit for the stockholders.

Question

Quizplus · Accepted Answer

The asset turnover ratio is a financial ratio that measures the sales revenue generated by the company in relation to the value of its assets. In other words, it measures how efficiently a company uses its assets to generate sales. Choice A is incorrect because the asset turnover ratio does not measure profit specifically. Choice B is incorrect because the asset turnover ratio does not measure financing risk. Choice D is incorrect because the asset turnover ratio does not measure the ability to earn profit for stockholders specifically.

The Asset Turnover Ratio Measures