Bob's Toys has a fixed asset turnover rate of 1.2 and a total asset turnover rate of.84. Gerold's Toys has a fixed asset turnover rate of 1.1 and a total asset turnover rate of.96. Both companies have similar operations. Bob's Toys:
A) Is using its fixed assets more efficiently than Gerold's Toys.
B) Is using its total assets more efficiently than Gerold's Toys.
C) Is generating $1 in sales for every $1.20 in net fixed assets.
D) Is generating $1.20 in net income for every $1 in net fixed assets.
E) Has $.84 in total assets for every $.96 Gerold's has in total assets.

Question

Quizplus · Accepted Answer

BBob's Toys has a higher fixed asset turnover rate (1.2) compared to Gerold's Toys (1.1), indicating it is using its fixed assets more efficiently. However, Gerold's Toys has a higher total asset turnover rate (.96) than Bob's Toys (.84), suggesting Gerold's Toys is using its total assets more efficiently, not Bob's Toys. Therefore, only the statement about Bob's Toys using its fixed assets more efficiently is correct. The explanation provided was incorrect; upon reevaluation, it's clear that Bob's Toys is not using its total assets more efficiently than Gerold's Toys, contradicting the initial assessment.

Bob's Toys Has a Fixed Asset Turnover Rate of 1