Alpha\'s has a fixed asset turnover rate of 1.12 and a total asset turnover rate

Question

Alpha's has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91. Beta's has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations. Based on this information, Alpha's must be doing which one of the following?
A. utilizing its fixed assets more efficiently than Beta's
B. utilizing its total assets more efficiently than Beta's
C. generating $1 in sales for every $1.12 in net fixed assets
D. generating $1.12 in net income for every $1 in net fixed assets
E. maintaining the same level of current assets as Sam's

Explanation / Answer

Total assets ratio represents how efficient the company is utilising its total assets for generation of revenues. Higher the ratio betters the performance.

Here, alpha total assets turnover ratio is better than Beta.

Hence, Option (B) is correct.

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