If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?
A)The number of stores has expanded.
B)Cost of Goods sold has been increasing.
C)Employee wages have been increasing.
D)The company has closed some of its stores.

Question

Quizplus · Accepted Answer

The fixed asset turnover (calculated as net sales revenue ÷ average net fixed assets)measures the ability of a company's fixed assets to generate net sales revenue.An expanded number of stores would cause average fixed assets (the denominator)to increase while the relatively constant net sales would keep the numerator the same.As a result,the fixed asset turnover measure would be decreasing (or eroding)over time.

If Net Sales Revenue for a Retail Chain Has Been