Financial Ratios (Scenario)
Jan was in a big hurry. She had just been given the assignment of reporting on the financial health of her company to the new divisional vice-president, Donna. Donna had asked Jan to provide several calculations to help her gain an understanding of the company's financial shape. Jan realized that this was a great career opportunity—one that could make or break her reputation with the new vice-president. She quickly pulled out her old financial management textbook and turned to the chapter on financial ratios to review the required calculations.
-Donna asked Jan to provide her with an estimate of how efficiently the firm is using its assets.Therefore,Jan calculated a(n)________ ratio called total asset turnover.

Question

Quizplus · Accepted Answer

The total asset turnover ratio is a measure of a company's efficiency in using its assets to generate sales. Therefore, it falls under the category of activity ratios. Leverage ratios measure a company's financial leverage, profitability ratios measure a company's ability to generate profits, and liquidity ratios measure a company's ability to meet short-term obligations. None of these measure the efficiency of asset use directly.

Financial Ratios (Scenario) Jan Was in a Big Hurry. She Had Just Been