Asset turnover measures
A) how often a company replaces its assets.
B) how efficiently a company uses its assets to generate sales.
C) the portion of the assets that have been financed by creditors.
D) the overall rate of return on assets.

Question

Quizplus · Accepted Answer

Asset turnover measures how efficiently a company uses its assets to generate sales. It is calculated by dividing net sales by average total assets. This ratio indicates how many dollars of sales are generated by each dollar of assets. It does not measure how often a company replaces its assets, the portion of assets that have been financed by creditors or the overall rate of return on assets.

Asset Turnover Measures