Which of the following is an asset utilization ratio?Multiple Choicereturn on assetsreceivables turnoverreturn on equitycurrent ratio

Break Down the Problem

1. Identify the options provided:

   • Return on assets
   • Receivables turnover
   • Return on equity
   • Current ratio

2. Determine what an asset utilization ratio is and how each option relates to it.

Relevant Concepts

• Asset Utilization Ratios measure how efficiently a company uses its assets to generate revenue.
• Key asset utilization ratios include:
  • Receivables Turnover: Measures how efficiently a firm collects its accounts receivable.
  • Return on Assets (ROA): Indicates how effectively a company uses its assets to achieve profit.

Analysis and Detail

1. Return on Assets (ROA): This ratio provides insight into how profitable a company's assets are in generating profits. It is calculated as: $\text{ROA} = \frac{\text{Net Income}}{\text{Total Assets}}$

2. Receivables Turnover: This measures how quickly a company collects cash from its credit sales. It is calculated as: $\text{Receivables Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}}$

3. Return on Equity (ROE): This ratio measures the profitability relative to shareholders' equity and is calculated by: $\text{ROE} = \frac{\text{Net Income}}{\text{Shareholders' Equity}}$

4. Current Ratio: This measures a company's ability to pay short-term obligations and is defined as: $\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$

Verify and Summarize

Among these options, the Receivables Turnover ratio is considered an asset utilization ratio as it specifically measures how efficiently a company utilizes its accounts receivable.

Final Answer

Receivables Turnover is an asset utilization ratio.