Answer (A) is correct . Ratios that measure movement of assets are known as turnover ratios. Working capital turnover measures the firm’s use of working capital in relation to sales. Sales are divided by average working capital. A high turnover is preferred.
Answer (B) is incorrect because Comparing one group of assets (working capital) to total assets does not measure activity.
Answer (C) is incorrect because Return on equity is a measure of income or profitability, not asset activity.
Answer (D) is incorrect because The current ratio measures solvency, or the adequacy of working capital, not its movement.
|
