Question

To raise the fixed asset turnover for a hospital, effective strategies might be to a) raise prices, b) increase utilization of fixed assets, c) neither raise prices or increase utilization of fixed assets, or d) by doing both

Answer 1

Answer is d. by doing both.

Explanation:

Fixed assets turnover ratio = Net sales revenue / Average fixed assets turnover.

when the prices are increased, the sales revenue will also increase and when the sales revenue (i.e. numerator of ratio) has been increased with the same level of fixed assets, the ratio is bound to raise.

When the utilization of fixed assets increased, which results in increased depreciation on fixed assets and reduced balance of fixed assets (i.e. denominator of the ratio). And when the denominator of ratio decreases with the same level of sales revenue, then also ratio is bound to rise.