Question

Consider the following condensed financials for Crean and Crimson Foods: INCOME STATEMENT: 2013 Sales $114,750.00 Cost of Goods Sold $68,850.00 Gross Margin $45,900.00 Depreciation $19,200.00 Administrative Costs $10,800.00 EBIT $15,900.00 Interest $4,000.00 Pre-tax income $11,900.00 Taxes $4,760.00 Net Income $7,140.00 Dividends $0.00 Addition to Retained Earnings $7,140.00 BALANCE SHEET AS OF 12/31/2013: ASSETS 2013 Cash $6,000.00 Inventory $18,467.00 Accounts Receivable $17,212.50 Current Assets $41,679.50 Net PPE $92,000.00 Total Assets (TA) $133,679.50 LIABILITIES & SHAREHOLDER EQUITY 2013 Accounts Payable $30,000.00 Current Liabilities $30,000.00 Long Term Debt $46,539.50 Total Liabilities $76,539.50 Shareholder Equity $57,140.00 Total Liabilities and Shareholder Equity $133,679.50 Find the asset turnover for the firm in 2013?

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. In other words, this ratio shows how efficiently a company can use its assets to generate sales.

The total asset turnover ratio calculates net sales as a percentage of assets to show how many sales are generated from each dollar of company assets. For instance, a ratio of .5 means that each dollar of assets generates 50 cents of sales

Total Asset = 133,679.50

Total Sales = 114,750.00

Asset Turnover = Net Sales / Total Assets = 114750/133679 = 0.858 times