Question

Identify a specific asset and the generic formula needed to value that asset. Then, provide an assessment of the cash flows, timing, and risk of that asset, and how those factors impact the asset's value. For example, how would you value a work of art by Pablo Picasso? What are the cash flows and when do you expect them to occur? What is the risk of buying that artwork? Get creative in the type of asset you identify to evaluate.

Answer 1

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing net sales with average total assets.

The asset turnover ratio is calculated by dividing net sales by average total assets.

This ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio is always more favorable. Higher turnover ratios mean the company is using its assets more efficiently. Lower ratios mean that the company isn't using its assets efficiently and most likely have management or production problems.