The Pasta Division of Whole Grain Corporation had sales of $7,000,000 and operating income of $1,190,000 last year. The total assets of the Pasta Division were $2,000,000, while current liabilities were $300,000. Whole Grain Corporation's target rate of return is 13%, while its weighted average cost of capital is 8%. The effective tax rate for the company is 40%. What is the Pasta Division's capital turnover?
A)5)9
B)6)7
C)23.3
D)3)5

Question

Quizplus · Accepted Answer

Capital turnover is calculated by dividing sales by total assets. For the Pasta Division, this is $7,000,000 / $2,000,000 = 3.5, which rounds to 3 when considering the provided options.

The Pasta Division of Whole Grain Corporation Had Sales of $7,000,000