Question

A firm with $600,000 in sales, cash on hand of $750,000, liabilities of $200,000 and total assets of $1 million has a total asset turnover of ______ times.

Answer 1

Answer:

 Total Asset Turnover = 0.6 times

                       

Explanation:

Total Asset Turnover = $600,000/$1,000,000

Total Asset Turnover = 0.6 times

It measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.

It is an important financial ratio used to understand how well the company is utilizing its assets to generate revenue.