Final answer:
Long-term Assets, or fixed assets, impact financial ratios like Current Ratio, Quick Ratio, Asset Turnover, and Return on Assets, which measure a company's liquidity, efficiency in using assets, and profitability.
Step-by-step explanation:
The term Long-term Assets refers to fixed assets or non-current assets that are held by a firm for an extended period, typically more than one year. These assets include items such as machinery, buildings, and land. Long-term assets are a crucial part of a company's balance sheet and can impact various financial ratios that assess the company's financial health and performance.
The Current Ratio and Quick Ratio are measures of a company's short-term liquidity. The Current Ratio is calculated by dividing current assets by current liabilities, indicating whether the company can cover its short-term obligations. The Quick Ratio is similar but excludes inventory from current assets, providing a stricter assessment of liquidity.
The Asset Turnover ratio measures how effectively a company uses its assets to generate sales. It is calculated by dividing net sales by average total assets. A higher Asset Turnover indicates more efficient use of assets.
Return on Assets (ROA) is a profitability ratio that measures how well a company's assets are being used to generate profit. It is calculated by dividing the net income by the average total assets. This gives investors and stakeholders an insight into how efficiently a company is converting its invested capital into net income.