Question

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. Net income and sales for the year are $100,000 and $800,000, respectively. What is Hidden Valley's asset turnover?

Answer 1

Answer:

Hidden Valley's Asset Turnover = 1.6

Explanation:

Average Total Asset = (Total Assets at the beginning of the year + Total Assets at the end of the year)/2

Average Total Asset = (450,000+550,000)/2

Average Total Asset = 1,000,0000/2 = 500,000

Asset Turnover = Net Sales / Average Total Asset

Asset Turnover = 800,000/500,000

Asset Turnover = 8/5

Asset Turnover = 1.6

Answer 2

Answer:

1.6

Explanation:

Asset turnover is a financial ratio that measures how much sales /revenue a company for investing $1 in assets. It is measured as the ratio of net sales to average total asset.

Average total assets = (asset value at start of the year + asset value at end of year)/2

Beginning asset value = $450,000

Ending asset value = $550,000

Average total assets = ($450,000 + $550,000)/2

= $500,000

Sales = $800,000

Asset turnover = $800,000/$500,000

= 1.6

This means that a revenue of $1.60 is generated for every $1.00 invested in assets.