Question

In: Accounting

Determine the asset turnover ratio. Round to one decimal place.

A company reports the following:

Sales $4,400,000

Average total assets 2,000,000

Determine the asset turnover ratio. Round to one decimal place.

Solutions

Expert Solution

Financial ratios : Financial ratios are indicators used to assess a company's liquidity, capabilities, profitability, and overall performance.

Rate of return on assets : Return on assets determines a company's total earning capability. It is calculated by dividing the sum of net income and interest expenditure by the average total assets.

Formula for calculationg Rate of return on assets 

Rate of return on assets = Net income + Interest expense / Average total assets

=$250,000 + $100,000 / $2,500,000

=14.0%

Therefore, rate of return on assets is 14.0%

balaji rao answered 2 years ago
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