Baker Inc. had reported the following details for the year ended December 31, 2012: $$\begin{array} { | l | r | }
\hline \text { Net sales } & \$ 24,750,000 \
\hline \text { Total assets } & 16,000,000 \
\hline \text { Total liabilities } & 9,500,000 \
\hline
\end{array}$$ The company's beginning total assets and liabilities were $14,000,000 and $8,000,000, respectively. Calculate the asset turnover ratio for 2012.

Question

Baker Inc. had reported the following details for the year ended December 31, 2012: $$\begin{array} { | l | r | } 
\hline \text { Net sales } & \$ 24,750,000 \
\hline \text { Total assets } & 16,000,000 \
\hline \text { Total liabilities } & 9,500,000 \
\hline
\end{array}$$ The company's beginning total assets and liabilities were $14,000,000 and $8,000,000, respectively. Calculate the asset turnover ratio for 2012.

Quizplus · Accepted Answer

Asset turnover ratio is calculated as follows:

Asset turnover ratio = Net sales / Average total assets

Average total assets = (Beginning total assets + Ending total assets) / 2
= ($14,000,000 + $16,000,000) / 2
= $15,000,000

Therefore, Asset turnover ratio = $24,750,000 / $15,000,000 = 1.65 times

Hence, the correct answer is (D) 1.65 times.

Baker Inc Had Reported the Following Details for the Year Ended