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

What does a total asset turnover ratio of 1.5 times represent?

The company pays $1.50 in interest for every $1.00 of assets.

The company earns $1.50 in net income for every $1.00 of assets.

The company has $1.50 in assets for every $1.00 of sales.

The company generates $1.50 in sales for every $1.00 of assets.

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the concept of the total asset turnover ratio. It is a financial metric that measures how efficiently a company uses its assets to generate sales revenue. The formula for total asset turnover ratio is:

\frac{Net Sales}{Total Assets}

Step 2: Analyze the given ratio of 1.5 times. This means that for every $1.00 of total assets, the company generates $1.50 in net sales revenue.

Step 3: Compare the provided options to the definition of the total asset turnover ratio. The correct interpretation aligns with the idea that the company generates $1.50 in sales for every $1.00 of assets.

Step 4: Eliminate incorrect options. For example, the ratio does not represent interest payments, net income, or the proportion of assets to sales. These interpretations do not match the formula or purpose of the total asset turnover ratio.

Step 5: Conclude that the correct answer is: 'The company generates $1.50 in sales for every $1.00 of assets,' as this accurately reflects the meaning of the total asset turnover ratio.