Question

Nvidia Corporation, a global technology company located in Santa Clara, California, reported the following information in its 2017 financial statements ($ in millions): 2017 2016 Balance sheets Property, plant, and equipment (net) $ 521 $ 466 Income statement Net sales for 2017 $ 6,910 Required: 1. Calculate the company’s 2017 fixed-asset turnover ratio

Answer 1

The fixed-asset turnover ratio for Nvidia Corporation in 2017 is calculated by dividing its net sales of $6,910 million by the average net PP&E of $493.5 million, resulting in a ratio of approximately 14.01.

Step-by-step explanation:

To calculate the fixed-asset turnover ratio for Nvidia Corporation in 2017, we divide the net sales by the average net value of property, plant, and equipment (PP&E) for the year. The formula for the fixed-asset turnover ratio is Net Sales / Average Net Fixed Assets. We can use the net values of PP&E for 2017 and 2016 to find the average.

First, we calculate the average net PP&E:

Average Net PP&E = (PP&E at the beginning of the year + PP&E at the end of the year) / 2 = ($466 + $521) / 2 = $493.5 million

Next, we use the formula to find the fixed-asset turnover ratio:

Fixed-Asset Turnover Ratio = Net Sales / Average Net PP&E = $6,910 million / $493.5 million ≈ 14.01

The fixed-asset turnover ratio for Nvidia Corporation in 2017 is approximately 14.01.

Answer 2

14

Step-by-step explanation:

Asset turnover is the ratio of revenue to average assets of a company. It is a financial indicator that shows how much revenue a company generates in an accounting period for each $ 1 invested in assets (fixed asset in this case).

Mathematically,

Fixed Asset turnover = Revenue / Average fixed assets

where average fixed assets

= (Opening balance + closing balance)/2

Average fixed asset

= ($ 521 + $ 466)/2

= $493.5 million

2017 fixed-asset turnover ratio

= $ 6,910/$493.5

= 14

It means that the company generated $14 for every $1 invested in fixed assets during the period.