mheducation.com t View Favoites Tools Help (2) Confim that your MtigCapital () C

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mheducation.com t View Favoites Tools Help (2) Confim that your MtigCapital () Confiem that your loan is.... SureSpot Inc-Your pe... LoginMember Account Login Account Login Manae Your Old Nary C. ll Manage Y Manage Your Old Naxy Cr... l Manage Yo Given the financial statements for Jones Corporation and Smith Corporation JONES CORPORATION Current Assets Cash Accounts receivable S 81,900 Accounts payable 136,000 89,500 88,000 Bonds payable (long term) 51,200 Long-Termm Assets Stockholders' Equity 555,000 151,000 Common stock Paid-in capital Gross fooed assets $ 150,000 70,000 279 600 725,100 Less Accumulated depreciation Net fxed assets 404,000 Retained eamings s 725,100 Total assets Total liabes and equity Sales (on creat Cost of goods sold Gross proft Selling and administrative expense Depreciabion expense Operating pront Interest expense Earnings before taxes Tax expense Net income 5 1,255.000 816,000 S 439,000 266,000 55.500 S117,500 10,000 107 500 96200 $ 11,300 "Use net fixed assets in computing fixed asset turnover tincludes $11,700 in lease payments SMITH CORPORATION Current Assets 84,000 233,000 5 39,400 Accounts payable Marketabile securnes Accounts receivable 10 500 72,300 Bonds payable (ong term) 6,900 Long-Term Assets Stockholders' Equity $ 561,000 259 700 Common stock Paid-in captal $ 75.000 0,000 Gross fxed assets Less Accumulated depreciation Net foed assets 301 300 Retained earnings s 500,800 otal abliies and equiry s 500,800 Use net fixed assets in computing fixed asset turnover SMITH CORPORATION 1,790,000 Sales (on credit) Cost of goods sold Gross proft Seling and administrative expense Depreciation expense Operaling prof Interest expense Eanings betore taxers Tax expense 315,000 T-155300- Net income 78, 700 Includes $11,700 in lease payments

Explanation / Answer

Fixed Asset Turnover ratio is the ratio that measures a firm's ability to generate net sales from fixed-asset investments like property, plant and equipment net of depreciation.

Fixed Asset Turnover = Net Sales / Net Fixed Asset

John Corporation:

Fixed Asset Turnover = 1,255,000 / 404,000 = 3.11

Smith Corporation:

Fixed Asset Turnover = 1,790,000 / 301,300 = 5.94 times

Fixed Asset Turnover ratio 3.11 times

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