Question

Campbell Co. has net sales revenue of $1,000,000, cost of goods sold of $680,000, and all other expenses of $232,000. The beginning balance of stockholders' equity is $320,000 and the beginning balance of fixed assets is $288,800. The ending balance of stockholders' equity is $480,000 and the ending balance of fixed assets is $311,200. The fixed asset turnover ratio is closest to _______

Answer 1

Answer:

3.33

Explanation:

The fixed asset turnover is the ratio between total sales over fixed assets. It measures how the company uses its fixed assets to generate sales. A low ratio means that the company has probably over-invested in fixed assets.

Fixed asset turnover ratio = total sales / average fixed assets

Fixed asset turnover ratio = $1,000,000 / [($288,800 + $311,200) / 2] = $1,000,000 / ($600,000 / 2) = $1,000,000 / $300,000 = 3.33