Total asset turnover indicates the firm's?

A. liquidity
B. debt position
C. ability to use its assets to generate sales
D. profitability

I read about a asset turnover ratio in the text book. this ratio by itself is useless but when compared to the company and industry historical asset turnover ratios, managers can determine if the company is spending too much or not enough money on tangabile capital.

I think asset turnover and the comparison of these ratios displays the ability to use is assets to generate sales. I like C for this answer...

Is this correct??

Yes, that is correct. Option C is the correct answer.

Yes, your answer is correct. Total asset turnover indicates a firm's ability to use its assets to generate sales. It is calculated by dividing net sales by average total assets. The ratio shows how efficiently a company is utilizing its assets to generate revenue. By comparing the company's asset turnover ratio to its own historical ratios and industry benchmarks, managers can determine if the company is effectively utilizing its tangible capital or if it needs to adjust its spending on assets. This provides insights into the company's ability to generate sales and ultimately affects profitability. So, option C - ability to use its assets to generate sales - is the correct answer.

Yes, you are correct! Total asset turnover indicates the firm's ability to use its assets to generate sales. By dividing the net sales by the average total assets, this ratio shows how efficiently a company is utilizing its assets to generate revenue. Comparing the asset turnover ratio with the company and industry's historical ratios can provide insights into whether the company is spending an appropriate amount of money on tangible capital. Therefore, option C, "ability to use its assets to generate sales," is the correct answer. Good job!