Question

Western wear has net working capital of $5,200, net fixed assets of $128,000, sales of $114,000, and current liabilities of $9,800. from each $1 in total assets, the firm generates sales of

Answer 1

In order to find the amount of sales generated from $1 of Total Assets, we will require to find the asset turnover ratio, This ration helps an organization to find the amount of sales earned per dollar invested in Total Assets. The formula can be given as below:

Asset Turnover Ratio=$\frac{Net Sales }{Average Total Assets}$

In the Given Problem:

Sales=$114000

Total Assets= Current Assets+Fixed Assets

Current Assets= Working Capital+Current Liabilitites

Current Assets=$5200+$9800

Current Assets=$15000

Total Assets= $15000+$128000

Total Assets= $ 143000

Asset Turnover Ratio=$\frac{114000}{143000}$

Asset Turnover Ratio=0.79

Thus the company earns $0.79 per $1 invested in Total Assets.