BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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salaries for upper management as a percentage of total expenses have decreased over the last three years
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a successful advertising campaign increased sales companywide, but with no increases in operating expenses
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New stores were added throughout the last three years and sales increased as a result of the additional new locations
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The company began construction of a new, larger main office location three years ago that was put into use at the end of the second year
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Detailed explanation-1: -Answer and Explanation: The correct answer is c. New stores were added throughout the last three years, and sales increased as a result of the additional new locations.
Detailed explanation-2: -This ratio is useful to determine the amount of sales that are generated from each dollar of assets. As noted above, companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover.
Detailed explanation-3: -Definition: Asset turnover ratio is the ratio between the value of a company’s sales or revenues and the value of its assets. It is an indicator of the efficiency with which a company is deploying its assets to produce the revenue. Thus, asset turnover ratio can be a determinant of a company’s performance.
Detailed explanation-4: -Asset Turnover Ratio = Net Sales / Average Total Assets It is the gross sales from a specific period less returns, allowances, or discounts taken by customers. When comparing the asset turnover ratio between companies, ensure the net sales calculations are being pulled from the same period.