Question

Income statement: 20X2 Sales $2,500,000 Cost of goods sold $1,300,000 Net income $200,000

Balance sheets:
a) 20X2
b) Accounts receivable $300,000
c) Total assets $2,000,000
d) Total shareholders' equity $900,000
a) 20X1
b) Accounts receivable $200,000
c) Total assets $1,800,000
d) Total shareholders' equity $700,000
The asset turnover for 20X2 is:

Answer 1

Asset turnover for 20X2 is calculated by dividing the total sales revenue by the average total assets, resulting in an approximate ratio of 1.32.

Step-by-step explanation:

The asset turnover for 20X2 can be calculated by dividing the net sales by the average total assets. In this case, the net sales of $2,500,000 can be divided by the average total assets of $2,000,000 from the balance sheets of 20X1 and 20X2. This gives us an asset turnover of 1.25.

The asset turnover for 20X2 is calculated by taking the total sales revenue and dividing it by the average total assets for the year. To find the average total assets, you add the total assets at the beginning of the year (20X1) to the total assets at the end of the year (20X2) and divide by two. Thus, the calculation for asset turnover would be $2,500,000 divided by (($1,800,000 + $2,000,000) / 2), which equals $2,500,000 divided by $1,900,000, resulting in an asset turnover ratio of approximately 1.32.