Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Total Asset Turnover

Financial Accounting

14. Financial Statement Analysis

Ratios: Total Asset Turnover

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

The total asset turnover ratio is computed by taking net sales divided by which of the following?

Total liabilities

Average shareholders' equity

Average total assets

Net income

Previous problemNext problem

Verified step by step guidance

Understand the concept of the total asset turnover ratio: This ratio measures how efficiently a company uses its assets to generate sales. It is calculated by dividing net sales by average total assets.

Identify the numerator in the formula: The numerator is 'net sales,' which represents the revenue generated from selling goods or services during a specific period.

Determine the denominator in the formula: The denominator is 'average total assets,' which is calculated by averaging the total assets at the beginning and end of the period. This provides a more accurate representation of the assets used during the period.

Write the formula for total asset turnover ratio: \( \text{Total Asset Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Total Assets}} \).

Clarify why other options are incorrect: Total liabilities, average shareholders' equity, and net income are not used in this formula because they do not directly measure the efficiency of asset utilization in generating sales.