Asset efficiency ratios for Fischer,Inc.are given in the table below.Based on this information,Fischer,Inc.'s fixed asset turnover ratio is likely to be ________.
A) equal to 3.50
B) less than 3.50
C) greater than 3.50
D) negative

Question

Asset efficiency ratios for Fischer,Inc.are given in the table below.Based on this information,Fischer,Inc.'s fixed asset turnover ratio is likely to be ________. 
A) equal to 3.50 
B) less than 3.50 
C) greater than 3.50 
D) negative

Quizplus · Accepted Answer

The fixed asset turnover ratio measures a company's ability to generate sales from its fixed assets. It is calculated by dividing sales by fixed assets.

From the table, we can see that Fischer, Inc.'s total asset turnover ratio is 1.75, which means that the company generates $1.75 in sales for every dollar of assets it owns.

The fixed asset turnover ratio is typically lower than the total asset turnover ratio, because fixed assets tend to be less liquid and generate revenue over a longer period of time. Therefore, if the total asset turnover ratio is 1.75, the fixed asset turnover ratio is likely to be less than 1.75, indicating that Fischer, Inc. generates less than $1.75 in sales for every dollar invested in fixed assets.

This eliminates options A, C, and D. Therefore, the correct answer is B) less than 3.50.

Asset Efficiency Ratios for Fischer,Inc