Question

Asset Turnover

The Home Depot reported the following data (in millions) in its recent financial statements:

	Year 2		Year 1
Sales	$108,203		$100,904
Total assets at the end of the year	44,003		44,529
Total assets at the beginning of the year	44,529		42,966

a. Determine the asset turnover for The Home Depot for Year 2 and Year 1. Round to two decimal places.

Year 2:	fill in the blank 1
Year 1:	fill in the blank 2

b. What do these turnover indicate concerning the trend in the ability of The Home Depot to effectively use its assets to generate sales?

Answer 1

	Year 2	Year 1
Sales	108203	100904
Total assets at the end of the year	44003	44529
Total assets beginning of the year	44529	42966
Average assets	(Opening assets+Closing assets)/2	(Opening assets+Closing assets)/2
	(44003+44529)/2	(42529+42966)/2
	44266	43747.5
Asset turnover	Sales/Average total assets	Sales/Average total assets
	108203/44266	100904/43747.5
(In Times)	2.44	2.31

Asset Turnover shows the ability to utilise assets in terms of generating sales.A higher ratio assure high

level of efficiency.By analysing home depot data it can be concluded that ability of gernerating more

sales by utilizising assets has been improved from past year.