A company has computed that their "asset turnover" is 3. Which of the following statements is the best interpretation of these results?
A) For every $3 of sales, $1 of net profit is generated.
B) For every $3 invested in assets, $1 in net profit is generated.
C) For every $1 invested in assets, $3 in sales are generated.
D) For every $3 invested in assets, $1 in sales are generated.

Question

Quizplus · Accepted Answer

Asset turnover is calculated by dividing net sales by average total assets. Therefore, an asset turnover of 3 indicates that for every dollar invested in assets, the company is generating $3 in sales.

A Company Has Computed That Their "Asset Turnover" Is 3