Previous Page 14 of 14E hen usine the asset turnover ratio w

Previous Page 14 of 14E hen usine the asset turnover ratio, which of the following is true O a. The ratio measures how effectively a business is using its assets to generate sales. O b. The assets used in computing this ratio may be the average of monthly assets O c. A high ratio indicates an effective use of assets. O d. All of these choices are true.

Solution

1. Option D is the answer

Asset Turnover ratio calculates how effectively the assets are used for generating sales. As it is evident, higher asset turnover ratio indicate better use of assets as they are able to generate higher sales.

2. Option D is the answer

Revenues and expenses are closed using income summary account. Any resulting income/loss is closed by transferring to Owner\'s Capital account. And the final closing entry is the drawings of the owner which is Capital account debit to Drawings account credit.