On January 1, 2011, a company has assets of $16 billion and stockholders' equity of $8 billion. On January 1, 2009, the same company has assets of $20 billion and stockholders' equity of $9 billion. During 2011, the company had total sales revenue of $9 billion and total expenses of $7 billion. The company's asset turnover ratio for 2011 is:
A) 2.5
B) 0.5
C) 0.45
D) 0.1

Question

Quizplus · Accepted Answer

The asset turnover ratio is calculated as sales revenue divided by average total assets. Average total assets for 2011 = ($16 billion + $20 billion) / 2 = $18 billion. Asset turnover ratio = $9 billion / $18 billion = 0.5.

On January 1, 2011, a Company Has Assets of $16