Go back to
CPA - Certified Public Accountant
Limitations of the information provided by total asset turnover include:
A good measure for trend analysis of a particular company, but variable ways of calculating cost of goods sold limit its usefulness for comparative analysis.
The calculation can be affected by varying accounting assumptions, which affect the calculation of net income.
Because of differing costs of capital, the measure cannot be effectively used for comparative analysis.
When making the calculation, total assets may need to be refined by the elimination of assets that do not relate to sales as the inclusion of these items could distort the measure.
Want to practice for CPA - Certified Public Accountant ?