Question

Compute the asset turnover ratio using the following information: net sales is $100,000 for the year, last year's assets in place were $900,000 and this year's assets in place are $1,100,000. Receivables for both years are $50,000.

Answer 1

Answer: 0.097

Explanation:

Given that,

Net sales = $100,000 for the year

Last year's assets = $900,000

Current year's assets = $1,100,000

Receivables for both years = $50,000

Total assets = Last year's assets + Current year's assets + Receivables for both years

                    = $900,000 + $1,100,000 + $50,000

                    = $2,050,000

Average of total assets = $\frac{2,050,000}{2}$

                                       = $1,025,000

Asset turnover ratio = $\frac{Net\ sales}{Average\ total\ assets}$

                                   = $\frac{100,000}{1,025,000}$

                                   = 0.097