Answer: Total asset turnover ratio

## Explanation When a company performs an inventory write-down: 1. **Inventory value decreases** (reducing total assets) 2. **Cost of goods sold (COGS) increases** (since the write-down is typically recorded as an expense) Let's analyze each ratio: ### A. Current Ratio - **Formula**: Current Assets / Current Liabilities - Inventory write-down reduces current assets (inventory is a current asset) - With lower current assets, the current ratio **decreases**, not increases ### B. Total Asset Turnover Ratio - **Formula**: Revenue / Average Total Assets - Inventory write-down reduces total assets (denominator decreases) - Revenue typically remains unchanged - When denominator decreases while numerator stays constant, the ratio **increases** - This is the correct answer ### C. Receivables Turnover Ratio - **Formula**: Revenue / Average Accounts Receivable - Inventory write-down does not directly affect accounts receivable - This ratio would likely remain unchanged **Key Insight**: The total asset turnover ratio increases because the write-down reduces total assets while revenue remains the same, making the company appear more efficient in using its assets to generate sales. **Additional Note**: While COGS increases from the write-down, this affects gross profit margin and net income, but not the total asset turnover ratio directly since COGS is not in that ratio's formula.

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