The R.M Smithers Corporation earned an operating profit margin of 11.2 percent b

Question

The R.M Smithers Corporation earned an operating profit margin of 11.2 percent based on sales of 10.5 millionand total assets of 4.8 million last year

a. what was Smither's total asset turnover ratio

b.During the coming year, the company's president has set a goal of attaining a total asset turnover of 3.3. How much must firm sales increase, othe things being the same, for the goal to be achieved? (state your answer in both doallr and the corresponding percent increase in sales.)

c. What was Smithers' operating return last year?

d. Assuming the firm's operating profit margin remains the same, what will the operating return on assets be next year if the total asset turnover goal is achieved?

Explanation / Answer

a. Asset Turnover ratio = Net Sales/ Average Turnover Assets

10.5/4.8=2.1875

Asset turnover Ratio= 2.1875 , it is assumed that the openings assets are same

b. Net Sales/Total Average Assets =3.3

=x/4.8=3.3

x=15.84 Million

Increase in sales=15.84-10.5=$ 5340000

Percentage increase in sales=5.34/10.5*100=50.85%

c. Smither`s Operating return=10.5*11.2%= $ 11,76,000

d. Operating Return of next year = 15.84*11.2%= 1774080 $

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