What ratio will definitely increase when a firm increases its annual sales with no corresponding increase in assets?
A) Asset turnover
B) Current ratio
C) Liquidity ratio
D) Quick ratio

Question

Quizplus · Accepted Answer

Asset turnover measures how efficiently a company uses its assets to generate revenue. When a firm increases its annual sales without any corresponding increase in assets, it means it is generating more revenue per dollar of assets, which leads to a higher asset turnover ratio. Current ratio, liquidity ratio, and quick ratio are all measures of a firm's liquidity, or its ability to meet its short-term obligations with its current assets. They are not directly affected by an increase in sales without a corresponding increase in assets.

What Ratio Will Definitely Increase When a Firm Increases Its