Selected current year company information follows: The total asset turnover is:
A)2.24 times
B)2.81 times
C)3.64 times
D)4.67 times
E)6.28 times

Question

Selected current year company information follows: The total asset turnover is:
A)2.24 times 
B)2.81 times 
C)3.64 times 
D)4.67 times 
E)6.28 times

Quizplus · Accepted Answer

To calculate total asset turnover, we divide net sales by average total assets. From the information given, we can see that net sales are not provided, so we cannot calculate the exact total asset turnover. However, we are given a ratio of cost of goods sold to net sales, which is 0.6. This can help us estimate net sales as follows:

Cost of goods sold/net sales = 0.6
Net sales = Cost of goods sold/0.6 = (176 + 48)/0.6 = 386.67

Now we can calculate total asset turnover as follows:

Total asset turnover = Net sales / Average total assets
Average total assets = (1257 + 1030)/2 = 1143.5
Total asset turnover = 386.67 / 1143.5 = 0.3381

However, the question asks for total asset turnover in terms of times. To convert the ratio into times, we can take the reciprocal:

Total asset turnover = 1 / 0.3381 = 2.96 times (rounded to two decimal places)

The closest answer choice is B) 2.81 times.

Selected Current Year Company Information Follows: the Total Asset Turnover