A company has an asset turnover ratio of 1.15.Which of the following statements is true?
A)The company generates $1.15 of net income for every $1 in reported assets.
B)The company buys assets more frequently than it sells them.
C)The company generates $1.15 of sales revenue for every $1 in reported assets.
D)This is an improvement over the previous period when the asset turnover rate was 1.7.

Question

Quizplus · Accepted Answer

Asset turnover ratio measures how efficiently a company is using its assets to generate revenue. An asset turnover ratio of 1.15 means that for every $1 of reported assets, the company generates $1.15 of sales revenue. Therefore, option C is the correct statement. Option A and B are not correct because the asset turnover ratio does not measure net income, and it does not provide information about how frequently the company buys or sells assets. Option D is not correct because it compares the current asset turnover ratio with a non-existent previous period ratio.

A Company Has an Asset Turnover Ratio of 1