If Pizza Pizza reports an asset turnover ratio of 2.34 for 2011 and their competitor Pizza Hut reports 3.79 for their 2011 ratio,it means which of the following?
A)Pizza Pizza is better able to pay their current obligations with their current assets.
B)Pizza Pizza has been more effective in managing the use and level of its assets.
C)Pizza Pizza has been less effective in managing the use and level of its assets.
D)Pizza Pizza is less able to pay off their current obligations with their current assets.

Question

Quizplus · Accepted Answer

Asset turnover ratio is calculated by dividing net sales by total assets. The higher the ratio, the more effective the company is in utilizing its assets to generate revenue. In this case, Pizza Hut has a higher asset turnover ratio than Pizza Pizza, indicating that they are better at managing their assets to generate sales. Therefore, choice C is the best answer as it accurately reflects this comparison.

If Pizza Pizza Reports an Asset Turnover Ratio of 2