Question

In: Finance

What is a firm's total asset turnover.

What is a firm's total asset turnover, If its fixed assets are 120,000 current assets are 30,000 current liabilities are 44,000 sales were 200,000 and net income was 75,000.

Solutions

Expert Solution

Assets turnover means the amount of turn over (sales) per $ of asset used.

So, mathematically it can be expressed as under :

Assets turnover ratio (ATO) = Sales / Total assets

Here, we have :

(We assume currency involved is in dollars)

Sales = $200000 

Fixed assets = $120000

Current assets = $30000 

Total assets employed = 120000 + 30000 = 150000 ($)

So,

ATO = 200000 / 150000 = 4/3 = 1.33

So, Assets Turnover ratio is = 1.33 (ANSWER)


The asset turnover will be = 1.33 

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