Defining total asset turnover as revenue divided by average total assets, all else equal, impairment write-downs of long-lived assets owned by a company will most likely result in an increase for that company in:
Answer is "both the debt-to-equity ratio and the total asset turnover.
My perspective: Yes, the asset turnover ratio must rise because the asset base decreases from the reduction in the PPE. Now, there must be a reduction elsewhere to balance out the A=L+E equation. Logically the Equity section reduces. But the answer key fails to say what part of the equity reduces. Is it the retained earnings that reduces?
Thanks for the feedback everyone.作者: kasinkei 时间: 2011-7-13 16:17
Yeah, retained earnings as part of equity reduced because of decrease in net income
