Which one of these changes indicates an improvement in a firm's asset management efficiency?
A)an increase in the amount of assets per dollar of sales.
B)an increase in the inventory turnover rate.
C)a decrease in the receivables turnover rate.
D)an increase in the average days in inventory.

Question

Quizplus · Accepted Answer

An increase in the inventory turnover rate indicates that the firm is selling its inventory at a faster pace and is therefore managing its assets more efficiently. Option A is incorrect because while an increase in the amount of assets may not necessarily indicate a decrease in efficiency, it could also be due to an increase in sales. Option C is incorrect because a decrease in the receivables turnover rate suggests that the firm is taking longer to collect its receivables and could be less efficient in managing its assets. Option D is incorrect because an increase in the average days in inventory means that the firm is holding onto its inventory for a longer period of time which could indicate less efficiency in managing assets.

Which One of These Changes Indicates an Improvement in a Firm's