During 2010, Rathke Corporation reported net sales of $2,000,000, net income of $1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Rathke's asset turnover ratio is
A) 2 times.
B) 1.6 times.
C) 1.3 times.
D) .96 times.

Question

Quizplus · Accepted Answer

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

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

Asset turnover ratio = Net sales / Average total assets 
Asset turnover ratio = $2,000,000 / $1,250,000 
Asset turnover ratio = 1.6 times

During 2010, Rathke Corporation Reported Net Sales of $2,000,000, Net