NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
A company reports sales of Rs 600 crore, and its average total assets during the year were Rs 300 crore. What is its total asset turnover ratio?
The total asset turnover ratio is 2 times, because it is sales divided by average total assets, that is Rs 600 crore divided by Rs 300 crore. It shows that each rupee of assets generated Rs 2 of sales during the year.
- A0.5 times
- B2 timesCorrect
- C3 times
- D1.5 times
Explanation
Total asset turnover = Sales / Average total assets = 600 / 300 = 2 times. The figure 0.5 times results from inverting the ratio (assets divided by sales). Checking: 2 x 300 = 600, which matches sales.
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