A firm with a total asset turnover lower than the industry standard may have
A) excessive debt.
B) excessive cost of goods sold.
C) insufficient sales.
D) insufficient fixed assets.

Question

Quizplus · Accepted Answer

Total asset turnover is calculated as sales divided by total assets. Therefore, a lower total asset turnover indicates that the firm is generating lower sales with its assets than the industry average. This could be due to insufficient sales, which may be the result of weak demand, poor marketing efforts, or low-quality products. Excessive debt, excessive cost of goods sold, and insufficient fixed assets may impact a firm's profitability, but they do not directly affect its total asset turnover.

A Firm with a Total Asset Turnover Lower Than the Industry