The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the question that follow.AssetsCash and short-term investments$30,000 Accounts receivable (net)20,000 Merchandise inventory15,000 Property, plant, and equipment185,000 Total assets$250,000 Liabilities and Stockholders' EquityCurrent liabilities$45,000 Long-term liabilities70,000 Stockholders' equity—common135,000 Total liabilities and stockholders' equity$250,000 Income StatementSales$85,000 Cost of merchandise sold45,000 Gross profit$40,000 Operating expenses(15,000)Interest expense(5,000)Net income$20,000 Number of shares of common stock outstanding 6,000Market price per share of common stock $20Total dividends paid $9,000Net cash flows from operating activities $30,000Using the data provided for Diane Company, what is the asset turnover?

Asset Turnover Ratio = Net sales/Average total assets

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the question that follow.

Assets
Cash and short-term investments	$30,000
Accounts receivable (net)	20,000
Merchandise inventory	15,000
Property, plant, and equipment	185,000
Total assets	$250,000

Liabilities and Stockholders' Equity
Current liabilities	$45,000
Long-term liabilities	70,000
Stockholders' equity—common	135,000
Total liabilities and stockholders' equity	$250,000

Income Statement
Sales	$85,000
Cost of merchandise sold	45,000
Gross profit	$40,000
Operating expenses	(15,000)
Interest expense	(5,000)
Net income	$20,000

Number of shares of common stock outstanding		6,000
Market price per share of common stock		$20
Total dividends paid		$9,000
Net cash flows from operating activities		$30,000

Using the data provided for Diane Company, what is the asset turnover?

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