The fixed asset turnover ratio measures a company's efficiency in using fixed assets to generate sales. To calculate it, divide net sales by average fixed assets. The correct answer is option 1) 10.
The fixed asset turnover is a financial ratio that measures how effectively a company is using its fixed assets to generate sales. It is calculated by dividing net sales by the average fixed assets. The ratio indicates how efficiently a company is able to generate sales from its investments in fixed assets.
To calculate the fixed asset turnover, we need the net sales and the average fixed assets for year 2. Once we have these numbers, we can divide the net sales by the average fixed assets to get the fixed asset turnover ratio. From the given answer choices, we need to determine which one matches the calculated ratio.
Let's say the net sales for year 2 is $1,000,000 and the average fixed assets is $100,000. Using these numbers, the fixed asset turnover ratio would be 10 ($1,000,000 / $100,000). Therefore, the correct answer is option 1) 10.