Champion Company has sales of $20 million, total debt of $1.5 million, and a debt ratio of 40%. What is Champion's total asset turnover?
A) 13.33
B) 9.11
C) 6.55
D) 5.33

Question

Quizplus · Accepted Answer

The total asset turnover is calculated as Sales / Total Assets. Given a debt ratio of 40%, this means that 40% of the company's assets are financed through debt. The debt ratio is calculated as Total Debt / Total Assets, so Total Assets = Total Debt / Debt Ratio = $1.5 million / 0.4 = $3.75 million. Therefore, the total asset turnover is $20 million / $3.75 million = 5.33.

Champion Company Has Sales of $20 Million, Total Debt of $1.5