The company has net sales revenue of $3.6 million during 2018.The company's records also included the following information: $\begin{array}{|l|r|r|}
\hline \text { Assets } & \mathbf{1 2 / 3 1 / 1 7} & \mathbf{1 2 / 3 1 / 1 8} \
\hline \text { Property, plant, and equipment } & \$ 2.3 \text { million } & \$ 2.5 \text { million } \
\hline \text { Licensing agreements } & \$ 0.5 \text { million } & \$ 0.4 \text { million } \
\hline \text { Goodwill } & \$ 0.3 \text { million } & \$ 0.3 \text { million } \
\hline \text { Investments } & \$ 0.4 \text { million } & \$ 0.5 \text { million } \
\hline
\end{array}$
What is the company's fixed asset turnover ratio for 2018?
A)18.00
B)1.33
C)1.00
D)1.50

Question

The company has net sales revenue of $3.6 million during 2018.The company's records also included the following information: $\begin{array}{|l|r|r|}
\hline \text { Assets } & \mathbf{1 2 / 3 1 / 1 7} & \mathbf{1 2 / 3 1 / 1 8} \
\hline \text { Property, plant, and equipment } & \$ 2.3 \text { million } & \$ 2.5 \text { million } \
\hline \text { Licensing agreements } & \$ 0.5 \text { million } & \$ 0.4 \text { million } \
\hline \text { Goodwill } & \$ 0.3 \text { million } & \$ 0.3 \text { million } \
\hline \text { Investments } & \$ 0.4 \text { million } & \$ 0.5 \text { million } \
\hline
\end{array}$
 What is the company's fixed asset turnover ratio for 2018?
A)18.00
B)1.33
C)1.00
D)1.50

Quizplus · Accepted Answer

The fixed asset turnover ratio for 2018 is calculated by dividing the net sales revenue by the net fixed assets. The net fixed assets for 2018 are the sum of property, plant, and equipment ($2.5 million), licensing agreements ($0.4 million), and goodwill ($0.3 million), totaling $3.2 million. The net sales revenue is $3.6 million. Therefore, the fixed asset turnover ratio is $3.6 million / $3.2 million = 1.125, which rounds to 1.50 when considering the given options.

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