During 2017 Rathke Corporation reported net sales of $3000000 net income of $1200000 and depreciation expense of $100000. Rathke also reported beginning total assets of $1000000 ending total assets of $1500000 plant assets of $800000 and accumulated depreciation of $500000. Rathke's asset turnover is
A) 3 times.
B) 2.4 times.
C) 2.0 times.
D) .96 times.

Question

Quizplus · Accepted Answer

Asset turnover ratio is calculated by dividing net sales by average total assets. Average total assets can be calculated by adding beginning and ending total assets and dividing by 2.

Average total assets = (Beginning total assets + Ending total assets) / 2
                             = ($1,000,000 + $1,500,000) / 2
                             = $1,250,000

Asset turnover ratio = Net sales / Average total assets
                              = $3,000,000 / $1,250,000
                              = 2.4 times

Therefore, the asset turnover ratio for Rathke Corporation is 2.4 times.

During 2017 Rathke Corporation Reported Net Sales of $3000000 Net