The metric that measures how efficiently assets are used

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Multiple Choice

The metric that measures how efficiently assets are used

Explanation:
Asset turnover ratio measures how efficiently assets are used to generate sales. It compares net sales to average total assets, so a higher ratio shows more sales are produced per dollar of assets, indicating better asset efficiency. For example, if net sales are 500,000 and average total assets are 250,000, the ratio is 2.0, meaning two dollars of sales per dollar of assets. The other terms don’t assess how effectively assets are utilized: a penetration test is about cybersecurity testing, a contract is a binding agreement, and the going concern principle is an accounting assumption about ongoing operations.

Asset turnover ratio measures how efficiently assets are used to generate sales. It compares net sales to average total assets, so a higher ratio shows more sales are produced per dollar of assets, indicating better asset efficiency. For example, if net sales are 500,000 and average total assets are 250,000, the ratio is 2.0, meaning two dollars of sales per dollar of assets. The other terms don’t assess how effectively assets are utilized: a penetration test is about cybersecurity testing, a contract is a binding agreement, and the going concern principle is an accounting assumption about ongoing operations.

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