Question

A company's average total assets are $275,000, depreciation expense is $20,000, and accumulated depreciation is $80,000. Net income is $1,500,000. Net sales total $325,000. What is the asset turnover?

Answer 1

The asset turnover ratio is calculated by dividing net sales by average total assets. Given the net sales of $325,000 and average total assets of $275,000, the asset turnover ratio for the company is 1.18.

Step-by-step explanation:

To calculate the asset turnover ratio, we use the following formula:

Asset Turnover = Net Sales / Average Total Assets

Net Sales for the company is provided as $325,000 and the Average Total Assets are $275,000. Plugging these values into our formula gives us:

Asset Turnover = $325,000 / $275,000

Asset Turnover = 1.18

Therefore, the company's asset turnover ratio is 1.18, which means that for every dollar of assets, the company generates $1.18 in sales.