Question

Given the total assets of 230,000, accounts receivable of28,000, net sales of 111,000, and net income of42,000, what is the asset turnover ratio?

Answer 1

The asset turnover ratio measures a company's ability to generate sales from its total assets. In this case, the ratio is approximately 0.4826.

Step-by-step explanation:

The asset turnover ratio is a financial metric that measures a company's ability to generate sales from its total assets. It is calculated by dividing net sales by average total assets. In this case, we have net sales of $111,000 and total assets of $230,000. To calculate the average total assets, we add the beginning total assets ($230,000) and ending total assets (which is the same as beginning total assets) and divide by 2. So, the average total assets would be $230,000.

Next, we can calculate the asset turnover ratio by dividing the net sales of $111,000 by the average total assets of $230,000: 111,000 / 230,000 = 0.4826. Therefore, the asset turnover ratio is approximately 0.4826.