Question

The balance sheet of Tech Track reports total assets of $400,000 and $600,000 at the beginning and end of the year, respectively. Sales revenue for the year is $1,000,000 ($800,000 in the previous year), net income is $40,000, and net cash flows from operating activities are $50,000. How does Tech Track's asset turnover compare to the industry average of 2.0 times

Answer 1

Answer: Same as

Explanation:

From the information given in the question, the asset turnover of Tech Track will be calculated thus;

Firstly, Average Assets will be:

= (beginning Assets + ending Assets)/2

= ($400000 + $600000)/2

= $1,000,000/2

= $500,000

Then, the assets turnover ratio will be:

= Sales / average Assets

= $1,000,000 / 500,000

= 2 times

Therefore, Tech Track's asset turnover is same as the industry average of 2.0 times.