Asset efficiency ratios for Fischer,Inc.are given in the table below.Based on this information,Fischer,Inc.'s fixed asset turnover ratio is likely to be ________.

A) equal to 3.50
B) less than 3.50
C) greater than 3.50
D) negative

Question

Asset efficiency ratios for Fischer,Inc.are given in the table below.Based on this information,Fischer,Inc.'s fixed asset turnover ratio is likely to be ________.

A) equal to 3.50 
B) less than 3.50 
C) greater than 3.50 
D) negative

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated as net sales divided by average fixed assets. Based on the table, the total asset turnover ratio is 2.00, which means that for every dollar of assets, the company generates $2 of sales. The inventory turnover ratio is 4.00, which indicates that the company turns over its inventory four times per year. The receivables turnover ratio is 8.00, which means that the company collects its receivables eight times per year.

All of these ratios suggest that the company is efficient in managing its assets. However, the fixed asset turnover ratio is likely to be less than 3.50, as the company's total asset turnover ratio is 2.00 and fixed assets typically represent a significant portion of total assets. Therefore, we can conclude that the company is generating relatively less sales per dollar of fixed assets compared to its total assets.

Asset Efficiency Ratios for Fischer,Inc