Question

A firm with $900,000 in sales, cash on hand of $1,150,000, liabilities of $400,000 and total assets of $2 million has a total asset turnover of ______ times.

Answer 1

0.45

Step-by-step explanation:

Total Asset turnover is the relationship between the total asset and the total sales. It measure the turnover generated by assets and shows how fully a company is utilizing its assets.

It is calculated as Net Sales / Average Total asset.

Average total asset is calculated as Asset at Beginning + Asset at closing / 2

Applying the formula

The total sales = $900,000 while the total asset is $2, 000,000

$900,000/$2,000,000 = 0.45

Note: The beginning and closing Asset were not given so $2,000,000 is regarded to as the average asset.