Qusetion: Directions: Use the information below to answer the following question.
|
20Y1 |
20Y2 |
20Y3 |
| Sales |
$1,840,000 |
$1,920,000 |
$1,750,000 |
| Net fixed assets |
$570,000 |
$620,000 |
$750,000 |
| sales/net fixed assets ratio |
3.23 |
3.10 |
2.33 |
Assuming no revaluation of fixed assets has occurred, which one of the following is the correct conclusion to draw from this trend?
A) the business is adding to its fixed assets at about the same rate that its sales are growing.
B) the business will need additional financing to add fixed assets to support the rate of sales growth.
C) the business has excess capacity and is not likely to need financing for new fixed assets.
D) the business has not depreciated its fixed assets according to accounting standards.