Question

For 2012, Hoyle Company reports beginning of the year total assets of $900,000, end of the year total assets of $1,100,000, net sales of $750,000, and net income of $150,000.

Hoyle's 2012 asset turnover ratio is
A) 0.68 times.
B) 0.15 times.
C) 0.75 times.
D) 0.14 times.

Answer 1

The asset turnover ratio is calculated by dividing the net sales by the average total assets. In this case, Hoyle Company's 2012 asset turnover ratio is 0.75 times.

Step-by-step explanation:

It measures how efficiently a company is using its assets to generate sales revenue.

In this case, we can use the formula:

Asset Turnover Ratio = Net Sales / Average Total Assets

Net Sales in 2012 = $750,000

Beginning of the year total assets = $900,000

End of the year total assets = $1,100,000

Average Total Assets = (Beginning of the year Total Assets + End of the year Total Assets) / 2 = ($900,000 + $1,100,000) / 2 = $1,000,000

Asset Turnover Ratio = $750,000 / $1,000,000 = 0.75 times

Therefore, Hoyle Company's 2012 asset turnover ratio is 0.75 times.