The correct formula for asset turnover is
A) Total revenues ÷ Average total assets
B) Total revenues ÷ Beginning of year total assets
C) Total revenues ÷ End of year total assets
D) Total revenues ÷ Maximum level of total assets during the year

Question

Quizplus · Accepted Answer

The correct formula for asset turnover is total revenues divided by the average total assets. Using the average total assets ensures that the calculation takes into account any changes that may have occurred throughout the year. Choice B only accounts for the beginning of the year total assets, while choice C only accounts for the end of the year total assets. Choice D uses the maximum level of total assets during the year, which may not accurately represent the actual level of assets used to generate revenue.

The Correct Formula for Asset Turnover Is