What would happen to asset turnover if additional assets were acquired at the end of 2015 for $2,000 on account?
A)Asset turnover would decrease.
B)Asset turnover would increase.
C)Asset turnover may increase or decrease depending on whether the company had net income or a net loss.
D)Asset turnover would not change.

Question

Quizplus · Accepted Answer

Asset turnover is calculated as net sales divided by average total assets. If additional assets were acquired at the end of the year on account, the average total assets for the year would increase. This would cause the asset turnover ratio to decrease because there would be a lower level of net sales relative to the higher level of assets.

What Would Happen to Asset Turnover If Additional Assets Were