Question

Kaleb's Karate Supply had a profit margin of 6.4 percent, sales of $10.5 million, and total assets of $6.4 million.

a. What was total asset turnover?
b. If management set a goal of increasing total asset turnover to 2.10 times, what would the new sales figure need to be, assuming no increase in total assets?
a. Total asset turnover
b. Sales

Answer 1

a. Total asset turnover is 1.64. b. The new sales figure needed is $13.44 million.

Step-by-step explanation:

a. Total asset turnover is a financial ratio that measures how efficiently a company uses its assets to generate sales. It is calculated by dividing sales by total assets. In this case, the total asset turnover can be calculated as:

Total Asset Turnover = Sales / Total Assets

Using the given values, the total asset turnover would be:

Total Asset Turnover = $10.5 million / $6.4 million = 1.64

b. To calculate the new sales figure, assuming no increase in total assets, we can rearrange the total asset turnover formula:

New Sales = Total Asset Turnover * Total Assets

Substituting the given values, the new sales figure would be:

New Sales = 2.10 * $6.4 million = $13.44 million