Question

Larry's Lab has sales of $35,750, net fixed assets of $14,500, current assets of $12,300, and cost of goods sold of $30,000. Which of the following is the fixed asset turnover ratio for the business?

Answer 1

Fixed assets turnover ratio (FAT) is 2.47 times for the business.

Step-by-step explanation:

The formula to compute the fixed assets turnover ratio is as:

Fixed assets turnover ratio (FAT) = Sales/ Net Fixed Assets

where

sales is $35,750

net fixed assets is $14,500

Putting the values in the formula:

FAT = $35,750 / $14,500

= 2.465 times or 2.47 times

This ratio indicates or states that how well the business is using its fixed assets in order to generate the sales for the business.