Question

Nvidia Corporation, a global technology company located in Santa Clara, California, reported the following information in its 2017 financial statements ($ in millions): 2017 2016 Balance sheets Property, plant, and equipment (net) $ 521 $ 466 Income statement Net sales for 2017 $ 6,910 Required: 1. Calculate the company’s 2017 fixed-asset turnover ratio

Answer 1

Answer:

14

Explanation:

Asset turnover is the ratio of revenue to average assets of a company. It is a financial indicator that shows how much revenue a company generates in an accounting period for each $ 1 invested in assets (fixed asset in this case).

Mathematically,

Fixed Asset turnover = Revenue / Average fixed assets

where average fixed assets

= (Opening balance + closing balance)/2

Average fixed asset

= ($ 521 + $ 466)/2

= $493.5 million

2017 fixed-asset turnover ratio

= $ 6,910/$493.5

= 14

It means that the company generated $14 for every $1 invested in fixed assets during the period.