What does a high Asset Turnover Ratio indicate about a company’s operational performance?
AExcessive holding of idle liquid assets
BPoor gross margin performance
CEfficient utilization of assets to generate revenues
DHigh reliance on long-term debt financing
Explanation
* Asset Turnover Ratio = Net Sales Revenue / Average Total Assets.
* A higher ratio indicates that the firm generates greater sales volume per unit of invested asset base.
* Industry benchmarks vary; retail businesses typically exhibit much higher turnover than heavy capital utility firms.
Exam Relevance
- Topic: Financial Statement Analysis
- Subtopic: Activity & Efficiency Ratios
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