Question

Asset turnover calculations:

a. communicate information about how promptly the entity pays its bills.
b. are made by dividing the average asset balance during the year by the sales for the year.
c. are made by dividing sales for the year by the asset balance at the end of the year.
d. should be evaluated by observing the turnover trend over a period of time.

Answer 1

D) should be evaluated by observing the turnover trend over a period of time.

Step-by-step explanation:

The asset turnover is the ratio between total sales over average assets. It measures how the company uses its fixed assets to generate sales.

This ratio can tell us information about how efficiently the company is using its assets to generate revenue, but most importantly it can help when we analyse a trend. That means that we compare our current ratio to prior ratios, to see if our company is more efficient or less efficient now. Information by itself is not useful unless you give it a proper use.