Question #34

The total asset turnover ratio = (sales / total assets) We can see from the exchange rates that the Russian ruble is depreciating (it takes fewer dollars to buy a ruble). With a depreciating local currency, sales are going to be the same under either method, since sales are translated at the average rate. Assets on the other hand will be higher under the temporal method, and lower under the current rate method. This is because all assets are translated at the current rate under the current rate method (which has the lower exchange rate), and at different rates under the temporal method (which is has fixed assets converted at the higher historical rate). With the same numerator and lower denominator, the current rate method will lead to the higher total asset turnover ratio.