Which metric illustrates how effectively a firm uses all its assets to generate sales?

The total asset turnover ratio is the correct metric to illustrate how effectively a firm uses all its assets to generate sales. This ratio is calculated by dividing the company’s total sales or revenue by its total assets. It provides insight into how efficiently a company is utilizing its assets to generate sales; a higher ratio indicates that the company is effectively using its assets to create revenue, while a lower ratio suggests that the company may not be utilizing its resources as efficiently as it could be.

This ratio is particularly valuable because it highlights the relationship between a firm's asset base and its sales performance. Companies with high asset turnover are typically able to generate more revenue per dollar of assets, which can indicate strong operational efficiency, effective management of resources, and high demand for their products or services.

In contrast, the other options relate to different aspects of financial performance or different liabilities. The debt-to-equity ratio focuses on the capital structure and financial leverage of a firm, the coverage ratio assesses the ability to meet debt obligations, and the average payment period measures how quickly a firm pays its suppliers. While all are important financial metrics, they do not directly relate to how well a company utilizes its assets to generate sales, which is the primary focus of the total asset turnover ratio.