Question

Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at the end of the year.

What was the company's turnover rounded to the nearest tenth?

A) 9.8

B) 10.2

C) 9.5

D) 9.2

Answer 1

The company's turnover rounded to the nearest tenth: C) 9.5

Step-by-step explanation:

Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:

Asset Turnover = Total Sales or Revenue/ Average Total Assets

where:

Average Total Assets = (Beginning Assets + Ending Assets )/2 = (Assets at the beginning of year +Assets at end of year )/2

In the House of Orange:

Average Total Assets = ($84,000 + $90,000)/2 = $87,000

Asset Turnover = $826,650/$87,000 = 9.5