A total asset turnover ratio of 3.5 indicates that
A)For every $1 in sales,the firm acquired $3.50 in assets during the year
B)For every $1 in assets,the firm produced $3.50 in net sales during the year
C)For every $1 in assets,the firm earned gross profit of $3.50 during the year
D)For every $1 in assets,the firm earned $3.50 in earnings per share
E)For every $1 in assets,the firm paid $3.50 in dividends per share

Question

Quizplus · Accepted Answer

A total asset turnover ratio of 3.5 indicates that for every $1 in assets, the firm produced $3.50 in net sales during the year. It measures a firm's efficiency in generating sales from its assets. Option A is incorrect because the ratio does not indicate how much the firm acquired in assets for every $1 in sales. Options C, D, and E are incorrect because the ratio does not relate to gross profit, earnings per share, or dividends per share.

A Total Asset Turnover Ratio of 3