Question : Assertion (A): The fixed asset turnover ratio aids in evaluating the stability of the company's long-term financial condition.
Reason (R): It displays the ratio of shareholders' funds to total long-term debt.
Option 1: Both (A) and (R) are true and (R) is the correct explanation of (A)
Option 2: Both (A) and (R) are true and (R) is not the correct explanation of (A)
Option 3: (A) is true, but (R) is false
Option 4: (A) is false, but (R) is true
Correct Answer: (A) is true, but (R) is false
Solution :
The fixed asset turnover ratio demonstrates the effectiveness of a company's current fixed assets in driving sales. A greater ratio suggests that management is making better use of its fixed assets.
How well a corporation uses its current fixed assets to generate sales is shown by its fixed asset turnover ratio.
Hence option 3 is the correct answer.
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