When a company records fictitious revenues, what is the effect on asset turnover ratio?
A) The ratio increases
B) The ratio decreases
C) No effect
D) The ratio might increase or decrease depending upon the transaction

Question

Quizplus · Accepted Answer

Recording fictitious revenues inflates sales without a corresponding increase in assets, thus increasing the asset turnover ratio, which measures sales generated for every dollar of assets.

When a Company Records Fictitious Revenues, What Is the Effect