The firm's asset turnover measures:
A)the value of assets held per dollar of shareholder equity.
B)the return the firm has earned on its past investments.
C)the firm's ability to sell a product for more than the cost of producing it.
D)how efficiently the firm is utilizing its assets to generate sales.

Question

Quizplus · Accepted Answer

The firm's asset turnover measures how efficiently the firm is utilizing its assets to generate sales. It is calculated by dividing the total sales by the average value of the firm's assets. A high asset turnover ratio indicates that the firm is using its assets effectively to generate revenue, whereas a low ratio indicates that the firm may be inefficient in its use of assets.

The Firm's Asset Turnover Measures