If Pizza Pizza reports an asset turnover ratio of 2.34 for 2013 and their competitor Pizza Hut reports 3.79 for their 2013 ratio, it means which of the following?
A) Pizza Pizza is better able to pay their current obligations with their current assets.
B) Pizza Pizza has been more effective in managing the use and level of its assets.
C) Pizza Pizza has been less effective in managing the use and level of its assets.
D) Pizza Pizza is less able to pay off their current obligations with their current assets.

Question

Quizplus · Accepted Answer

The asset turnover ratio measures a company's ability to generate sales from its assets. A higher ratio indicates more efficiency. Therefore, Pizza Hut's higher ratio suggests Pizza Pizza has been less effective in managing its assets.

If Pizza Pizza Reports an Asset Turnover Ratio of 2