Accountancy Part BAccounting Ratios

Higher turnover ratio means:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Better utilization of assets

A turnover (activity) ratio shows how many times the assets are turned into sales during a period. The more sales the same assets generate, the better they are being used, so a higher turnover points to efficiency, not to under-use or a fall in efficiency.

NCERT (2026-27 edition):
Activity (or Turnover) Ratio – “… The activity ratios express the number of times assets employed, or, for that matter, any constituent of assets, is turned into sales during an accounting period. Higher turnover ratio means better utilisation of assets and signifies improved efficiency and profitability, and as such are known as efficiency ratios.”