Question

Which of the following statements is correct?

a) With liquidity ratios, it is assumed that the fixed assets will be converted to cash which will then be used to retire total liabilities.
b) LTD to Totat Capitalization = Long Term Debt / (Short Term Debt + Total Assets).
c) All the answers are correct.
d) Inventory Turnover = Gross Profit / Inventory.
e) The total asset turnover ratio describes how efficiently the firm is using all of its assets to generate sales.

Answer 1

The total asset turnover ratio describes how efficiently the firm is using all of its assets to generate sales.

Step-by-step explanation:

The correct statement among the given options is e) The total asset turnover ratio describes how efficiently the firm is using all of its assets to generate sales.

This ratio is used to measure a company's efficiency in generating sales using its assets. It is calculated by dividing the company's net sales by its average total assets.

The higher the total asset turnover ratio, the more efficiently the company is using its assets to generate sales.