Question

a firm has net working capital of $390, net fixed assets of $2,136, sales of $5,000, and current liabilities of $700. how many dollars worth of sales are generated from every $1 in total assets?

Answer 1

We must apply the formula for total asset turnover to get the amount of sales produced for each $1 in total assets:

Sales / Total Assets = Total Asset Turnover.

By combining the firm's net working capital and net fixed assets, we may determine its total assets:

Net working capital + net fixed assets = total assets.

Assets total = $390 + $2,136.

Assets totaled $2,526.

We can now enter the following values into the calculation for total asset turnover:

Sales / Total Assets equals Total Asset Turnover.

Turnover of Total Assets = $5,000 / $2,526

Turnover of Total Assets = 1.98

Thus, this company makes $1.98 in revenue for every $1 in total assets.