If a company's fixed asset turnover ratio decreased from 2010 to 2011, which of the following conclusions can be made?
A) The company was more efficient during 2011 in using its fixed assets to produce profits
B) The company produced less sales in 2011 for each dollar invested in fixed assets compare to 2010.
C) The company was less profitable in 2010.
D) The company over invested in fixed assets in 2010.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio measures how efficiently a company uses its fixed assets to generate sales. A decrease in the ratio means that the company generated less sales for each dollar invested in fixed assets in 2011 compared to 2010. Therefore, option B is the correct choice. Option A is incorrect because a decrease in the fixed asset turnover ratio means less efficiency, not more. Option C is unrelated to the fixed asset turnover ratio. Option D is an assumption that cannot be made based on the given information.

If a Company's Fixed Asset Turnover Ratio Decreased from 2010