The following data were included in a recent Papaya Inc. annual report (in milli

Question

The following data were included in a recent Papaya Inc. annual report (in millions): 2010 2011 2012 2013 Net revenue Net property, plant, and equipment $75,225 $124,549 $175,500 $177,910 8,680 15,550 4,890 14,900 Required 1. Compute Papaya's fixed asset turnover ratio for 2011, 2012, and 2013. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Fixed Asset Turnover Ratio Year 2011 2012 2013 2. During 2013, Microsoft reported a fixed asset turnover ratio of 9.5. Was Papaya's turnover better or worse than Microsoft's in that year? O Better O Worse

Explanation / Answer

Answer to Question 1:

Answer 1.

2011:

Average Net Fixed Assets = ($4,890 + $8,680) / 2
Average Net Fixed Assets = $6,785

Fixed Asset Turnover Ratio = Net Revenue / Average Net Fixed Assets
Fixed Asset Turnover Ratio = $124,549 / $6,785
Fixed Asset Turnover Ratio = 18.4 times

2012:

Average Net Fixed Assets = ($8,680 + $15,550) / 2
Average Net Fixed Assets = $12,115

Fixed Asset Turnover Ratio = Net Revenue / Average Net Fixed Assets
Fixed Asset Turnover Ratio = $175,500 / $12,115
Fixed Asset Turnover Ratio = 14.5 times

2013:

Average Net Fixed Assets = ($15,550 + $14,900) / 2
Average Net Fixed Assets = $15,225

Fixed Asset Turnover Ratio = Net Revenue / Average Net Fixed Assets
Fixed Asset Turnover Ratio = $177,910 / $15,225
Fixed Asset Turnover Ratio = 11.7 times

Answer 2.

During 2013, Microsoft reported a fixed asset turnover ratio of 9.5 which is worse than Papaya’s turnover ratio.

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