Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?
A)Decrease in the total asset turnover
B)Decrease in the capital intensity ratio
C)Increase in days' sales in receivables
D)Decrease in the profit margin
E)Decrease in the inventory turnover rate

Question

Quizplus · Accepted Answer

A decrease in the capital intensity ratio indicates that the firm is using less capital (assets) to generate revenue, which indicates greater efficiency in asset utilization. A decrease in total asset turnover (A) and inventory turnover rate (E) suggests less efficient use of assets. An increase in days' sales in receivables (C) indicates that the firm is taking longer to collect payments, which could indicate problems with cash flow. A decrease in the profit margin (D) suggests decreased profitability, but does not necessarily indicate efficiency in asset utilization.

Which One of the Following Best Indicates a Firm Is