Question

The company has net sales revenue of $5.0 million during 2018. The company's records also included the following information: Assets 12/31/17 12/31/18 Property, plant and equipment $ 3.0 million $ 3.9 million Licensing agreements $ 1.2 million $ 1.1 million Goodwill $ 1.0 million $ 1.0 million Investments $ 1.1 million $ 1.2 million What is the company's fixed asset turnover ratio for 2018

Answer 1

Answer:

1.45 times

Explanation:

The computation of company's fixed asset turnover ratio is shown below:-

Average of Net Property, plant and equipment = ($3.0 million +  $3.9 million) ÷ 2

= $6.9 million ÷ 2

= $3.45 million

Fixed asset turnover ratio = Net Sales ÷ Average of Net Property, plant and equipment

= $5 million ÷ $3.45 million

= 1.45 times

Therefore for computing the fixed assets turnover ratio we simply applied the above formula.