Question

Julian Company reports the following: net sales of $25,000 for Year 2 and $22,000 for Year 1; end-of-year total assets of $14,500 for Year 2 and $13,100 for Year 1. Compute its total asset turnover for Year 2 and assess its level if competitors average a total asset turnover of 2.3 times.

Answer 1

The total asset turnover for Year Two (2) is 1.72

Julian's Copmany's level is not efficient as its competitors.

Step-by-step explanation:

• Make a plan:

In this question, we need to calculate the total asset turnover of Julian's Company for year Two (2).

Then we get to compare it with the competitor's average total asset turnover to assess its level.

• Solve the problem:

Compute its total asset turnover for year Two (2)

We can get the total asset turnover for year Two (2)

25,000 / 14,500 = 1.72

50 / 29 = 1.724138

= 1.72

Assess its level if Julian's Company's total asset turnover for Year Two (2) is lower than the competitor's average complete asset turnover of 2.3 Times.

This indicates that Julian's Company is not using its assets as efficiently as its competitors.

• Draw the conclusion:

The total asset turnover for Year Two (2) is 1.72

Julian's Copmany's level is not efficient as its competitors.

• Second Explanation:

Fixed Amount (Turnover Times) = operating revenue / average net value of fixed assets

• Now:

Average Net Value of fixed assets = (beginning balance of fixed assets + end balance of the net value of fixed assets) / 2

• Then:

Average Net Value of fixed assets = 14,500 + 13,100 / 2 = 13800

• Now:

Asset Turnover = 22,000 / 13,800 = 1.6

• Since:

1.6 < 2.3, Julians Company's Turnover efficiency is not as efficient as its competitor's company.

I hope this helps!

Answer 2

The total asset turnover for Year 2 is approximately 1.81 times. Comparing this to the average total asset turnover of 2.3 times for competitors, it suggests that Julian Company may be less efficient in generating sales from its assets compared to its competitors.

Step-by-step explanation:

The formula for calculating total asset turnover is :

Total Asset Turnover = Net Sales ÷ Average Total Assets

Certainly! Here's the math using the given numbers:

1. Average Total Assets = (Year 2 Total Assets + Year 1 Total Assets) / 2

Average Total Assets = (14,500 + 13,100) / 2

Average Total Assets = 13,800

2. Total Asset Turnover = Net Sales / Average Total Assets

Total Asset Turnover = 25,000 / 13,800

Total Asset Turnover ≈ 1.81

Therefore, the total asset turnover for Year 2 is approximately 1.81 times.

Longer explanation

1. Julian Company made $25,000 in sales in Year 2 and $22,000 in Year 1.

2. At the end of Year 2, Julian Company had $14,500 worth of stuff, and at the end of Year 1, they had $13,100 worth of stuff.

3. We want to figure out how well Julian Company used its stuff to make money in Year 2.

4. To do that, we use a special formula called "total asset turnover."

5. Total asset turnover tells us how much money a company made for each dollar of stuff they had.

6. By using the formula, we find that Julian Company made $1.81 for each dollar of stuff they had in Year 2.

7. We also know that other companies, on average, made $2.30 for each dollar of stuff they had.

8. Since Julian Company's number is lower, it means they might not be using their stuff as well as their competitors to make money.

In summary, Julian Company made $25,000 in Year 2 and had $14,500 worth of stuff. They made $1.81 for each dollar of stuff they had, while their competitors made $2.30. This suggests that Julian Company may not be using their stuff as effectively as their competitors to make money.

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