A firm with a total asset turnover lower than the industry standard may have
A) excessive debt.
B) insufficient sales.
C) excessive cost of goods sold.
D) insufficient fixed assets.

Question

Quizplus · Accepted Answer

Total asset turnover measures a firm's ability to generate sales from its assets. A lower total asset turnover indicates that the firm is not generating enough sales from its assets as compared to the industry standard. This could be due to insufficient sales, meaning the company is not generating enough revenue to fully utilize its assets. The other options, such as excessive debt or cost of goods sold, may impact profitability but are not directly related to asset turnover. Insufficient fixed assets may also impact the firm's ability to generate sales, but not necessarily its total asset turnover.

A Firm with a Total Asset Turnover Lower Than the Industry