Question

For 2020, Cullumber Company reported beginning total assets of $200,000 and ending total assets of $340,000. Its net income for this period was $40,000, and its net sales were $297,000.

Compute the company's asset turnover for 2020. (Round answer to 2 decimal places, e.g. 52.75.)

Answer 1

The assets turnover ratio for 2020 is 1.10 times.

Step-by-step explanation:

The assets turnover ratio is calculated by dividing the Net sales by the average total net assets. This ratio tells us the efficiency of a company's assets in generating sales. The ratio tells how much $ sales are generated for each $1 of the asset.

The formula for Assets turnover = Net Sales / Average net total assets

The average net total assets = (200000 + 340000) / 2 = $270000

The assets turnover for 2020 = 297000 / 270000 = 1.10 times