Asked by Sarah Gaines on Jun 13, 2024
Verified
Bountiful Company had sales of $650,000 and cost of goods sold of $200,000 during a year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the asset turnover ratio.
A) 3.00
B) 3.80
C) 0.29
D) 0.26
Asset Turnover Ratio
A financial ratio that measures the efficiency of a company at using its assets to generate sales or revenue.
Total Assets
The sum of everything of value owned by a business, including cash, securities, inventory, property, and other tangible and intangible assets.
- Comprehend the process of closing accounts and computing financial ratios within accounting.
Verified Answer
SA
Sakshi AgarwalJun 14, 2024
Final Answer :
B
Explanation :
Asset turnover ratio = Sales / Average Total Assets
Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
= ($175,000 + $167,000) / 2
= $171,000
Asset turnover ratio = $650,000 / $171,000
= 3.80
Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
= ($175,000 + $167,000) / 2
= $171,000
Asset turnover ratio = $650,000 / $171,000
= 3.80
Learning Objectives
- Comprehend the process of closing accounts and computing financial ratios within accounting.