Question

Suppose Miller Inc. is able somehow to reduce its fixed assets without affecting the company's operations, sales, net income, or equity. This reduction will decrease which of the following ratios?A. Capital intensity ratioB. Return on assetsC. Total asset turnoverD. Return on equity

Answer 1

Answer:

A. Capital intensity ratio

Explanation:

Capital intensity ratio -

For a company , the value of the amount of capital needed to the dollar of revenue , is known as the capital intensity ration .

Capital Intensity ratio is the reciprocal of the total asset turnover ratio .  

The ration is given by dividing , the company's total asset by the sales .

Hence , from the question ,

The lower capital intensity ratio of the company means the company need less assets than a company with higher ratio to produce equal amount of sales .