In 2011,DAL Co.reported a fixed asset turnover ratio of 1.83 and in 2012,1.63.What was the most likely cause of this drop?
A)An increase in sales.
B)An increase in fixed assets.
C)A decrease in fixed assets.
D)An increase in profit.

Question

Quizplus · Accepted Answer

The fixed asset turnover ratio is calculated as sales divided by fixed assets. A decrease in the ratio from 1.83 to 1.63 suggests that either sales decreased or fixed assets increased. Since the question asks for the most likely cause of the drop, an increase in fixed assets is the most plausible explanation.