Question

Compute the asset turnover ratio using the following information: net sales is $100,000 for the year, last year's assets in place were $900,000 and this year's assets in place are $1,100,000. Receivables for both years are $50,000.

Answer 1

Answer: 0.097

Step-by-step explanation:

Given that,

Net sales = $100,000 for the year

Last year's assets = $900,000

Current year's assets = $1,100,000

Receivables for both years = $50,000

Total assets = Last year's assets + Current year's assets + Receivables for both years

= $900,000 + $1,100,000 + $50,000

= $2,050,000

Average of total assets =
`(2,050,000)/(2)`

= $1,025,000

Asset turnover ratio =
`(Net\ sales)/(Average\ total\ assets)`

=
`(100,000)/(1,025,000)`

= 0.097