Question

Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set? a. 28.5% b. 30.0% c. 31.5% d. 33.1% e. 34.7%

Answer 1

B. 30.0%

Step-by-step explanation:

Sales ratio = Fixed Assets\ Full Capacity Sales

Target FA\Sales ratio = 100 000 000/250 000 000*75%=0.3

B. 30.0% The correct answer is B.