Question

Mead Company had sales of $747,000 and cost of merchandise sold of $217,000 for the year. Total assets at the beginning of the year were $123,000. Total assets at the end of the year were $101,000. Calculate the asset turnover

Answer 1

The asset turnover for Mead Company is approximately 6.67, calculated by dividing its sales of $747,000 by the average total assets for the year, which is $112,000.

Step-by-step explanation:

The asset turnover ratio is a measure of how effectively a company uses its assets to generate sales. It is calculated by dividing sales by the average total assets for the period. For Mead Company with sales of $747,000 and total assets of $123,000 at the beginning of the year and $101,000 at the end of the year, we calculate the average total assets as ($123,000 + $101,000) / 2, which equals $112,000. The asset turnover ratio is then $747,000 / $112,000, which equals approximately 6.67.