Question

A total asset turnover ratio of 2.6 indicates that:

Multiple Choice For every $1 in sales, the firm acquired $2.6 in assets during the period For every $1 in assets, the firm produced $2.6 in net sales during the period. For every $1 in assets, the firm earned gross profit of $2.6 during the period. For every $1 in assets, the firm earned $2.6 in net income For every $1 in assets, the firm paid $2.6 in expenses during the period

Answer 1

The correct answer is For every $ 1 in assets, the firm $ 2.6 in net sales during the period.

This is because , The Total asset turnover ratio = Net Sales / Total Assets

Hence, for every $ 1 of total assets, the net sales earned is $ 2.6

This ratio indicates the amount of revenue generated for the total assets invested in the business.