Question

RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following?A Utilizing its fixed assets more efficiently than Sam's B Generating $1 in sales for every $1.26 in net fixed assets.C Generating $1.26 in net income for every $1 in net fixed assets.D Maintaining the same level of current assets as Sam'sE Utilizing its total assets more efficiently than Sam's.

Answer 1

Answer:

D Maintaining the same level of current assets as Sam'sE Utilizing its total assets more efficiently than Sam's.

Explanation:

In general, the higher the ratio – the more "turns" – the better. But whether a particular ratio is good or bad depends on the industry in which your company operates.