Question

Asset turnover ratio Financial statement data for years ended December 31, 20Y3 and 20Y2, for Edison Company follow: 20Y3 20Y2 Sales $2,385,000 $2,015,500 Total assets: Beginning of year 770,000 620,000 End of year 820,000 770,000 a. Determine the asset turnover ratio for 20Y3 and 20Y2. Round answers to one decimal place. 20Y3 20Y2 Asset turnover fill in the blank 1 fill in the blank 2 b. Is the change in the asset turnover ratio from 20Y2 to 20Y3 favorable or unfavorable

Answer 1

a. Asset Turnover 20Y3

= Sales / Average assets

= 2,385,000 / [ (770,000 + 820,000) / 2]

= 2,385,000 / 795,000

= 3.0

Asset Turnover 20Y2

= 2,015,500 / [ (620,000 + 770,000) / 2]

= 2,015,500 / 695,000

= 2.9

b. The change is Favorable because it means that the assets are bringing in more sales per dollar value of assets to the company.