Which of the following statements is inaccurate with respect to the total asset turnover ratio?
A)The ratio is calculated as sales revenues divided by total assets at year-end.
B)The ratio is decreased when additional plant and equipment is purchased.
C)A high ratio implies efficient management of assets.
D)The ratio is decreased when additional inventory is purchased.

Question

Quizplus · Accepted Answer

The total asset turnover ratio is calculated as sales revenues divided by average total assets, not just the total assets at year-end. This average is typically calculated by taking the sum of the assets at the beginning and end of the period and dividing by two, to provide a more accurate measure of the company's asset utilization over the period.

Which of the Following Statements Is Inaccurate with Respect to the Total