Question

An increase in the fixed asset turnover ratio from 2.0 to 2.7 indicates a.an unfavorable change in the efficiency of using fixed assets to pay down debt. b.a favorable change in the efficiency of using fixed assets to generate sales. c.an unfavorable change in the efficiency of using fixed assets to generate sales. d.None of these choices are correct.

Answer 1

The correct answer is B

Step-by-step explanation:

Fixed assets are those assets which are the tangible in nature, long- term assets which are used in a business and are classified as equipment, property and plant.

The fixed asset turnover ratio is the ratio which states or reveals how efficiently a company or business is generating or creating sales from its existing fixed assets.

If the fixed asset turnover ratio is increasing then it is indicating that it is a favourable change in the efficiency of the business using the fixed assets in order to generate sales for the business.