As sales increase over time, assets will increase at the same growth rate so long as the…
A) asset turnover increases
B) asset turnover ratio remains constant
C) asset turnover ratio decreases
D) profit margin remains constant

Question

Quizplus · Accepted Answer

Asset turnover ratio measures how effectively a company is using its assets to generate revenue. As long as the asset turnover ratio remains constant, sales increase will result in an increase in assets at the same rate. If the asset turnover ratio increases, assets will increase at a faster rate, and if it decreases, assets will increase at a slower rate. Profit margin, while important, does not directly affect the relationship between sales and assets.

As Sales Increase Over Time, Assets Will Increase at the Same