The asset turnover ratio is computed by dividing
A) net income by ending total assets.
B) net income by average total assets.
C) net sales by ending total assets.
D) net sales by average total assets.

Question

Quizplus · Accepted Answer

The asset turnover ratio is calculated by dividing net sales by average total assets, as it measures how efficiently a company uses its assets to generate sales. Option A is incorrect as it uses net income instead of net sales, while option B is incorrect as it uses ending total assets instead of average total assets. Option C is also incorrect as it does not use average total assets.

The Asset Turnover Ratio Is Computed by Dividing