The proportion of annual gross revenue relative to fixed capital investment is referred to as the ________________ ratio?
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Answer: C. Turnover
Explanation
The turnover ratio is calculated by dividing annual gross revenue by the fixed capital investment amount. This ratio measures how efficiently a company uses its fixed assets to generate commercial sales revenue. A higher turnover ratio indicates more effective utilization of the capital invested in physical plant equipment. Fixed capital investment encompasses all permanent assets like reactors distillation columns and structural buildings. Gross revenue represents the total monetary value of all chemical products sold during a given year. Industrial benchmarks for turnover ratios vary significantly depending on the specific chemical sector involved.
Corporate executives monitor turnover ratios to compare asset productivity across different manufacturing business units. Low turnover ratios suggest overcapacity or poor market demand for the manufactured chemical products. Plant designers strive to improve efficiency to maximize revenue generation relative to expensive fixed assets. Cash reserve ratio refers to banking regulations rather than chemical plant revenue and asset comparisons. Capital ratio is a general term not specifically defined as annual gross revenue over fixed capital. Investment ratio is too broad and does not specifically denote the gross revenue to fixed capital relationship.
- Subject
- Engineering
- Category
- Chemical Engineering
- Topic
- —
- Difficulty
- medium
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