Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and fixed asset turnover ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive
A) current liabilities.
B) fixed assets.
C) long-term debt.
D) current assets.

Question

Quizplus · Accepted Answer

The firm's total asset turnover ratio is lower than the industry norm, indicating that it is not using its assets as efficiently as other firms in the industry. Since its current ratio and fixed asset turnover ratio meet industry standards, the inefficiency likely lies in excessive current assets, which are not being utilized effectively to generate sales.

Assume That a Particular Firm Has a Total Asset Turnover