Question

A change in the asset turnover ratio from 1.3 to 1.6 would indicate a. a decrease in the effectiveness of assets in producing sales. by. an unfavorable trend in using assets to generate sales. ca favorable trend in using assets to generate sales. d. None of these choices are correct.

Answer 1

Answer:

a decrease in the effectiveness of assets in producing sales by a favorable trend in using assets to generate sales.

Explanation:

Assets turnover ratio = $\frac{Net Sales}{Average assets}$

Therefore when the ratio increases it means the level of sales has increased, with a higher rate than earlier.

Now also with this it reflects that the effectiveness of assets in producing sales as by a favorable trend, as higher the ratio more favorable it is, as depicts higher sales.