A firm has a higher asset turnover ratio than the industry average, which implies
A) the firm has a higher P/E ratio than other firms in the industry.
B) the firm is more likely to avoid insolvency in the short run than other firms in the industry.
C) the firm is more profitable than other firms in the industry.
D) the firm is utilizing assets more efficiently than other firms in the industry.
E) the firm has higher spending on new fixed assets than other firms in the industry.

Question

Quizplus · Accepted Answer

The asset turnover ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio indicates more efficient use of assets compared to the industry average.

A Firm Has a Higher Asset Turnover Ratio Than the Industry