Question

The fiscal 2016 financial statements for Walgreens Boots Alliance, Inc., report net sales of $117,351 million, net operating profit after tax of $4,687 million, net operating assets of $39,502 million. The 2015 balance sheet reports net operating assets of $42,683 million. Walgreen's 2016 net operating asset turnover is: A. 11.5% B. 2.86 C. 13.3% D. 2.97 E. There is not enough information to calculate the ratio.

Answer 1

Answer:

B) 2.86

Explanation:

Net operating asset turnover = Net sales / Average NOA

= $117,351 / [($39,502 + $42,683) / 2] = 2.86

Answer 2

Answer:

D. 2.97

Explanation:

The net operating asset turnover ratio is used to measure the efficiency of operating assets and to determine how well these assets are used to generate sales. The assets that are tested here are operating assets that are those assets which are required to run the day-to-day operations of the business. For instance, Property, plant, and equipment, inventory, and cash etc. Investments and unutilized assets do not fall under this category.

Here are are required to calculate the net operating asset turnover ratio, which is calculated as follows:

        Net operating asset turnover = Net sales / Net operating assets

⇒ Net operating asset turnover for 2016 = 117,351 m / 39,502 m = 2.97.

It means that for each dollar invested in the operating assets generates $2.97 of revenue.