Question

The Home Depot reported the following data (in millions) in its recent financial statements

Particulars	Year 2	Year 1
Sales	$83,176	$78,812
Total assets at the end of the year	39,946	40,518
Total assets at the beginning of the year	40,518	41,084

(a) Determine the asset turnover for the home depot for Year 2 and Year 1. Round to two decimal places

Answer 1

The asset turnover ratio is used to measure a company's efficiency in using assets to generate revenue. The asset turnover formula is shown below.

Calculation of asset turnover for year 2

Asset turnover  = Net revenue / Average total assets

                         = $83,176 / $40,232

                         = 2.07

Calculation of average total assets

Average total assets = Beginning assets + Ending assets / 2

                                 =  $40,518 + $39,946 / 2

                                 =  $40,232

Calculation of assets turnover for Year 1

Asset turnover = Net revenue / Average Total assets

                        = $78,812 /  $40,801

                        = 1.93

Calculation of Average total assets

Average total assets = Beginning assets + Ending assets / 2

                                 = $41,084 + $40,518 / 2

                                 = $40,801

 

 

 

As a result, for the firm The Home Depot, the asset turnover for years two and one is, respectively, 2.07 and 1.93.