Which of the following is true of fixed asset turnover?
A)It measures the efficiency with which a company uses its fixed assets to generate sales.
B)It measures the proportion of fixed assets to total assets.
C)It uses net purchases as a denominator in its calculation.
D)It measures the profits generated by the fixed and current assets of the company.

Question

Quizplus · Accepted Answer

Fixed asset turnover is a financial ratio that measures the efficiency with which a company utilizes its fixed assets to generate sales. It is calculated by dividing net sales by the average value of fixed assets during the period. Choice B is referring to the fixed asset ratio, choice C is referring to the accounts payable turnover ratio, and choice D is not a correct definition of any financial ratio.

Which of the Following Is True of Fixed Asset Turnover