Question

Baldwin has an asset turnover of 1.55 (Asset Turnover = Sales/Assets). That means:________.

1. Every $1.00 of assets in the firm generates $1.55 of profit.
2. Every $1.55 of profit in the firm comes from each $1.00 of sales.
3. Every $1.55 of assets in the firm generates $1.00 of sales.
4. Each $1.00 of assets in the firm generates $1.55 of sales revenue.

Answer 1

4. Each $1.00 of assets in the firm generates $1.55 of sales revenue.

Step-by-step explanation:

Given that

The asset turnover ratio is 1.55 times

Also, it could be calculated by applying the following formula

Asset turnover ratio is

= Sales ÷ Average assets

In this the comparison is made for generating the sales by considering the assets

Therefore in the given case, the last option is correct and hence the same is to be considered