A firm with a total asset turnover lower than industry standard may have ________.
A) excessive debt
B) excessive interest costs
C) insufficient sales
D) insufficient fixed assets

Question

Quizplus · Accepted Answer

Total asset turnover measures a company's efficiency in generating sales from its assets. If a firm has a lower total asset turnover than the industry standard, it suggests that the company is not generating enough sales from its assets. This could be due to a variety of factors, but the most likely reason is insufficient sales. Excessive debt or interest costs could affect a company's profitability, but they would not directly affect its asset turnover ratio. Insufficient fixed assets could also contribute to a low asset turnover ratio, but this would be less common than insufficient sales.

A Firm with a Total Asset Turnover Lower Than Industry