If net sales revenue $\bold{rises}$ 5% while the average book value of fixed assets falls 5%:
A)the fixed asset turnover ratio will rise.
B)the fixed asset turnover ratio will fall.
C)the fixed asset turnover ratio will stay the same.
D)the impact on the fixed asset turnover ratio cannot be determined since the beginning values are unknown.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated as net sales divided by the average book value of fixed assets. If net sales increase and the average book value of fixed assets decreases, the ratio will increase because the numerator (net sales) is increasing while the denominator (average book value of fixed assets) is decreasing.

If Net Sales Revenue rises\bold{rises}rises 5% While the Average Book Value of Fixed Assets Falls

If Net Sales Revenue $\bold{rises}$ 5% While the Average Book Value of Fixed Assets Falls