Financial Reporting and Analysis Q190

0. Which of the following is most likely accurate about the interpretation of activity ratios?

A
A working capital turnover of 3.6 indicates that the company generates 3.6 of net income for everyone of working capital.
B
A low fixed asset turnover ratio may indicate a labor intensive environment.
C
A high payables turnover ratio implies a low accounts payables balance relative to purchases.

Answer
Comment
Array

Option : C
Explanation : Statement A is incorrect because a working capital turnover of 3.6 indicates that the company generates $3.6 of revenue for every $1 of working capital. Statement B is incorrect because a low fixed asset turnover ratio may indicate a capital intensive environment. Statement C is correct.

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