A firm reported working capital of $5.5 million and fixed assets of $20 million. Its fixed asset turnover was 1.2 times. What was the firm's sales to working capital ratio?
A) 2.21 times
B) 4.36 times
C) 5.19 times
D) 6.03 times

Question

Quizplus · Accepted Answer

The firm's sales can be calculated using the fixed asset turnover ratio, which is defined as Sales / Fixed Assets. Given a fixed asset turnover of 1.2 times and fixed assets of $20 million, the firm's sales are $24 million ($20 million * 1.2). The sales to working capital ratio is then calculated as Sales / Working Capital, which equals $24 million / $5.5 million = 4.36 times.

A Firm Reported Working Capital of $5