The _____ measures how effectively a firm uses its assets to generate net income.
A) liquidity ratio
B) activity ratio
C) leverage ratio
D) profitability ratio

Question

Quizplus · Accepted Answer

The activity ratio, also known as the asset turnover ratio, measures how effectively a firm uses its assets to generate revenue. It is calculated by dividing revenue by total assets. This ratio indicates how efficient a company is at utilizing its assets to generate sales and can be used to compare the performance of companies in the same industry.

The _____ Measures How Effectively a Firm Uses Its Assets