Question

A firm has net working capital of $440, net fixed assets of $2,186, sales of $5,500, and current liabilities of $750. How many dollars worth of sales are generated from every $1 in total assets?
a. $1.70
b. $2.52
c. $1.63
d. $1.87
e. $2.09

Answer 1

Answer:

c. $1.63

Explanation:

We have to calculate the asset turnover which is shown below:

Total asset turnover = (Sales revenue ÷ Total assets)

where,

Sales revenue = $5,500

The net working capital = Current assets - current liabilities

$440 = Current asset - $750

So, the current asset = $750 + $440

                                   = $1,190

And, the total asset equal to

= Fixed asset + current asset

= $2,186 + $1,190

= $3,376

Now the total asset turnover equal to

= $5,500 ÷ $3,376

= 1.63