Question

At the end of 2014, Stacky Corp. had $500,000 in liabilities and a debt-to-assets ratio of 0.5. For 2014 Stacky had an asset turnover of 3.0. What were annual sales for Stacky in 2014? A. $333,333 B. $1,200,000 C. $1,800,000 D. $3,000,000 E. None of the above

Answer 1

Answer: D. $3,000,000

Explanation:

Asset turnover is the ratio of total sales or revenue to average assets

Debt to asset ratio is total liabilities divided by total assets.

Total liability is $500,000

Debt to asset ratio is total liability/total asset= 500,000/total asset = 0.5

Total asset = 500,000 x 10/5

Total asset = 1,000,000

Asset turn over = total sales/average asset

Assets turnover = 3.0

3.0= total sales/1,000,000

3.0= total sales/1,000,000

Total sales = 3.0 x 1,000,000

Total sales = 3,000,000