Question

The following financial statement data are for the year ending December 31 for Agency Company: Sales $200,000 Total assets: Beginning of year 170,000 End of year 150,000 What is the asset turnover ratio for the year

Answer 1

Answer:

1.25

Explanation:

asset turnover ratio = net sales / average total assets = $200,000 / [($170,000 + $150,000) / 2] = $200,000 / $160,000 = 1.25

Asset turnover ratio is a useful indicator of a company's efficiency, since it measures total sales relative to total assets. A company that uses its assets to generate sales more efficiently will have a higher asset turnover ratio.