On January 1,2017 Hillop,Inc.had total assets of $369,000.During the year,the company purchased new machinery worth $90,000 and promised to pay the amount due after two years.Throughout the year,it earned revenue of $59,000 every month.Calculate the asset turnover ratio.

Question

Quizplus · Accepted Answer

Asset turnover ratio = Net sales / Average total assets
Net sales = $59,000 × 12 = $708,000
Average total assets = [$369,000 + ($369,000 + $90,000)] / 2 = $414,000
Asset turnover ratio = 708,000 / 414,000 = 1.71 times