Which of the following ratios is the best measure for analyzing a company's efficiency in using assets to produce sales revenues?
A)Current ratio
B)Return on assets
C)Asset turnover ratio
D)Debt-to-total assets ratio

Question

Quizplus · Accepted Answer

The asset turnover ratio measures how efficiently a company is using its assets to generate sales revenue. It is calculated by dividing the company's net sales by its total assets. A higher asset turnover ratio indicates that the company is generating more sales revenue per dollar invested in assets, which is an indication of efficient asset utilization. Current ratio (A) is a liquidity ratio that measures a company's ability to pay its short-term liabilities with its short-term assets. Return on assets (B) measures a company's profitability relative to its total assets. Debt-to-total assets ratio (D) measures the percentage of a company's assets that are funded by debt. While debt financing is a useful tool for companies, it does not directly measure efficiency in using assets to produce sales revenues.

Which of the Following Ratios Is the Best Measure for Analyzing