On January 1,2017 Hillop,Inc.had total assets of $370,000.During the year,the company purchased new machinery worth $88,000 and promised to pay the amount due after two years.Throughout the year,it earned revenue of $60,000 every month.Calculate the asset turnover ratio.

Question

Quizplus · Accepted Answer

C)Asset turnover ratio = Net sales / Average total assets
Net sales = $60,000 × 12 = $720,000
Average total assets = [$370,000 + ($370,000 + $88,000)] / 2 = $414,000
Asset turnover ratio = 720,000 / 414,000 = 1.74 times