A Level Accounting (9706)•9706/12/M/J/18
Explanation
Non-Current Assets Turnover Ratio Calculation
Steps:
- Obtain net sales from the income statement, e.g., $750,000.
- Calculate average non-current assets: (beginning balance + ending balance) / 2, e.g., (200,000) / 2 = $150,000.
- Apply formula: Net Sales / Average Non-Current Assets = 200,000 = 3.75 times.
- Compare to options to select matching value.
Why C is correct:
- Matches the formula for non-current assets turnover (Net Sales / Average Non-Current Assets), yielding 3.75 times per standard accounting definition.
Why the others are wrong:
- A: Likely from using total assets instead of non-current only.
- B: Possible error dividing by current assets or including inventory.
- D: May result from using ending balance alone, not average.
Final answer: C
Topic: Analysis and communication of accounting information
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