Question

eBook Asset Turnover The ABC Depot reported the following data (in millions) in its recent financial statements: Year 2: Year 1: Show Me How Sales $126,240 Total assets at the end of the year 76,000 Total assets at the beginning of the year 81,800 a. Determine the asset turnover for The ABC Depot for Year 2 and Year 1. Round to one decimal place. 0.105 X Feedback Year 2 Year 1 $115,700 81,800 96,200 b. What do these turnover indicate concerning the trend in the ability of The ABC Depot to effectively use Check My Work (a) Average Total Assets = (Beginning Total Assets + Ending Total Assets) + 2; Divide Sales by Average Total Assets ​

Answer 1

Explanation:

To calculate the asset turnover for The ABC Depot, we need to divide its sales by its average total assets:

a) Asset turnover for Year 2:

Average total assets = (Beginning total assets + Ending total assets) / 2

= (81,800 + 76,000) / 2

= 78,900

Asset turnover = Sales / Average total assets

= $126,240 / $78,900

= 1.596 (rounded to one decimal place)

Asset turnover for Year 2 is 1.6.

b) Asset turnover for Year 1:

Average total assets = (Beginning total assets + Ending total assets) / 2

= (81,800 + 96,200) / 2

= 89,000

Asset turnover = Sales / Average total assets

= $115,700 / $89,000

= 1.299 (rounded to one decimal place)

Asset turnover for Year 1 is 1.3.

Comparing the asset turnover for Year 2 and Year 1, we can see that it has decreased, indicating a decreasing trend in the ability of The ABC Depot to effectively use its assets to generate sales.