Question

The fixed-asset turnover ratio indicates the level of ______ generated by each dollar of fixed assets.

1) sales
2) receivables
3) cash
4) net income

Answer 1

The fixed-asset turnover ratio measures how effectively a company uses its fixed assets to generate sales. A higher ratio indicates better efficiency in using fixed assets to produce revenue.

Step-by-step explanation:

The fixed-asset turnover ratio is a financial metric used to evaluate a company's efficiency in using its fixed assets to generate sales. It is calculated by dividing net sales by the average net fixed assets for the period. A higher fixed-asset turnover ratio implies that the company is effectively using its investment in fixed assets to produce revenue.

For instance, if a company has net sales of $5 million and its average fixed assets are $1 million, the fixed-asset turnover ratio would be 5. This means that for every dollar invested in fixed assets, the company generates $5 in sales.

Therefore, the fixed-asset turnover ratio indicates the level of sales generated by each dollar of fixed assets.