Question

On january​ 1, 2017​ hillop, inc. had total assets of​ $370,000. during the​ year, the company purchased new machinery worth​ $88,000 and promised to pay the amount due after two years. throughout the​ year, it earned revenue of​ $60,000 every month. calculate the asset turnover ratio.

Answer 1

asset turnover ratio is the ratio of the value of a company's sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue. Given that the sales is 60k and the value of the asset is 370k, the ratio is simply the sales / value of assets which is 60/(370-88).