Which of the following ratios is used to measure a firm's efficiency at using its assets?
Question
Which of the following ratios is used to measure a firm's efficiency at using its assets?
Solution
The ratio used to measure a firm's efficiency at using its assets is known as the Asset Turnover Ratio. This ratio is calculated by dividing the company's net sales by its total assets. It shows how efficiently a company can use its assets to generate sales. A higher ratio indicates more efficient use of assets.
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