Which of the following ratios is excluded from the Asset Management Ratios category?
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Answer: C. Capital Intensity Ratio
Explanation
Capital intensity ratio measures total assets relative to sales rather than operational asset management. This metric evaluates overall capital structure and asset efficiency rather than specific turnover speeds. Consequently, capital intensity is excluded from standard asset management turnover ratio categories. Asset management ratios evaluate how efficiently a company manages its inventory, receivables, and assets. Inventory turnover and receivable turnover measure how rapidly operational assets convert into cash. Capital intensity compares total asset investment directly against generated sales revenues over periods.
Capital-intensive industries like manufacturing exhibit high capital intensity ratios due to heavy machinery. Financial analysts use turnover ratios to assess operational efficiency across competing retail businesses. Management monitors asset utilization metrics to optimize working capital and reduce financing needs. Option A is an inventory turnover ratio, which belongs to the asset management category for stock. Option B is receivable turnover, which measures collection speed and fits asset management classifications. Option D mentions return on assets, which is a profitability metric rather than a pure turnover ratio.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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