A total asset turnover ratio of 3.5 indicates that:
A) For every $1 in sales, the firm acquired $3.50 in assets during the period.
B) For every $1 in assets, the firm produced $3.50 in net sales during the period.
C) For every $1 in assets, the firm earned gross profit of $3.50 during the period.
D) For every $1 in assets, the firm earned $3.50 in net income.
E) For every $1 in assets, the firm paid $3.50 in expenses during the period.

Question

Quizplus · Accepted Answer

A total asset turnover ratio of 3.5 indicates that for every $1 in assets, the firm produced $3.50 in net sales during the period. This ratio measures a company's ability to generate sales from its assets. A higher ratio is generally better as it indicates that the company is using its assets efficiently to generate revenue.

A Total Asset Turnover Ratio of 3