1. Sales have increased by 15% & avg total assets have increased by 12% since th
ID: 2740479 • Letter: 1
Question
1. Sales have increased by 15% & avg total assets have increased by 12% since that time. What is the current asset turnover ratio? Last years asset turnover ratio was 1.5
2. What are the annual sales for this company with $582,000 debt, a total debt ratio of 0.6, and an asset turnover of 2.7?
1. Sales have increased by 15% & avg total assets have increased by 12% since that time. What is the current asset turnover ratio? Last years asset turnover ratio was 1.5
2. What are the annual sales for this company with $582,000 debt, a total debt ratio of 0.6, and an asset turnover of 2.7?
Explanation / Answer
Solution 1:
Current asset turnover = last year’s asset turnover x (+ Increase in sales)/ (+ increase in assets)
= 1.50 x (1+0.15)/ (1+0.12)
= 1.725 / 1.12
= 1.54
Therefore, current asset turnover would be 1.54.
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