close solutoin list

Fixed asset turnover ratio Verizon Communications Inc. is a major telecommunications company in the United States. Two recent balance sheets for Verizon disclosed the following information regarding fixed assets: End of Year (in millions) Beginning of Year (in millions) Property, plant, and equipment 5220,163 $230,508 Less accumulated depreciation 136,622 140,561 Property, plant, and equipment (net) $83,541 $89,947 Verizon's revenue for the year was $131,620 million. Assume that the fixed asset turnover ratio for the telecommunications industry averages approximately 1.1. a. Determine Verizon's fixed asset turnover ratio. Round to one decimal place. b. Interpret this ratio with respect to the industry average.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 10, Problem 10.24EX
Textbook Problem

Fixed asset turnover ratio

Verizon Communications Inc. is a major telecommunications company in the United States. Two recent balance sheets for Verizon disclosed the following information regarding fixed assets:

  End of Year (in millions) Beginning of Year (in millions)
Property, plant, and equipment 5220,163 $230,508
Less accumulated depreciation 136,622 140,561
Property, plant, and equipment (net) $83,541 $89,947

Verizon's revenue for the year was $131,620 million. Assume that the fixed asset turnover ratio for the telecommunications industry averages approximately 1.1.

  1. a. Determine Verizon's fixed asset turnover ratio. Round to one decimal place.
  2. b. Interpret this ratio with respect to the industry average.

Expert Solution

a.

To determine

Fixed Asset turnover: It is a ratio that measures the productive capacity of the fixed assets to generate the sales revenue for the company. Thus, it shows the relationship between the net sales and the average total fixed assets. The following is the formula to calculate the ratio:

FixedAsset turnover =SalesAverage totalfixed assets

To determine: the fixed asset Turnover Ratio of Company V.

Explanation of Solution

Calculate the fixed asset turnover ratio of Company V.

Sales revenue= $131,620 million

Total average fixed assets= $86,744 (1)

FixedAssets Turnover=SalesAverage FixedAssets=$131,620$86,744=1.5times

Working note:

Calculate the average total fixed assets.

Beginning total fixed assets = $89,947 million

Ending total fixed assets  = $83,541 million

Average total assets=Total Beginning FixedAssets+Total EndingFixed Assets2

Expert Solution

b.

To determine

To interpret: the fixed asset turnover ratio with the industry average.

Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Chapter 10 Solutions

Accounting
Show all chapter solutions
Ch. 10 - Straight-line depreciation A building acquired at...Ch. 10 - Straight-line depreciation Equipment acquired at...Ch. 10 - Units-of-activity depreciation A truck acquired at...Ch. 10 - Units-of-activity depreciation A tractor acquired...Ch. 10 - Double declining-balance depreciation A building...Ch. 10 - Double-declining-balance depreciation Equipment...Ch. 10 - Revision of depreciation Equipment with a cost of...Ch. 10 - Revision of depreciation A truck with a cost of...Ch. 10 - Capital and revenue expenditures On February 14,...Ch. 10 - Capital and revenue expenditures On August 7,...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Depletion Glacier Mining Co. acquired mineral...Ch. 10 - Depletion Caldwell Mining Co. acquired mineral...Ch. 10 - Impaired goodwill and amortization of patent On...Ch. 10 - Impaired goodwill and amortization of patent On...Ch. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Costs of acquiring fixed assets Melinda Stoffers...Ch. 10 - Determining cost of land Bridger Ski Co. has...Ch. 10 - Determining cost of land On-Time Delivery Company...Ch. 10 - Nature of depreciation Tri-City Ironworks Co....Ch. 10 - Straight-line depreciation rates Convert each of...Ch. 10 - Straight-line depreciation A refrigerator used by...Ch. 10 - Depreciation by units-of-activity method A...Ch. 10 - Depreciation by units-of-activity method Prior to...Ch. 10 - Depreciation by two methods A Kubota tractor...Ch. 10 - Depreciation by two methods A storage tank...Ch. 10 - Partial-year depreciation Equipment acquired at a...Ch. 10 - Revision of depreciation A building with a cost of...Ch. 10 - Capital and revenue expenditures US Freight Lines...Ch. 10 - Capital and revenue expenditures Jackie Fox owns...Ch. 10 - Capital and revenue expenditures Quality Move...Ch. 10 - Capital expenditure and depreciation; parital-year...Ch. 10 - Entries for sale of fixed asset Equipment acquired...Ch. 10 - Disposal of fixed asset Equipment acquired on...Ch. 10 - Depletion entries Alaska Mining Co. acquired...Ch. 10 - Amortization entries Kleen Company acquired patent...Ch. 10 - Book value of fixed assets Apple Inc. designs,...Ch. 10 - Balance sheet presentation List the errors you...Ch. 10 - Fixed asset turnover ratio Amazon.com, Inc. is the...Ch. 10 - Fixed asset turnover ratio Verizon Communications...Ch. 10 - Fixed asset turnover ratio FedEx Corporation and...Ch. 10 - Fixed asset turnover ratio The following table...Ch. 10 - Asset traded for similar asset A printing press...Ch. 10 - Asset traded for similar asset Assume the same...Ch. 10 - Entries for trade of fixed asset On July 1, Twin...Ch. 10 - Entries for trade of fixed asset On October 1,...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Dexter...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Waylander...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Ethics in Action Hard Bodies Co. is a fitness...Ch. 10 - Ethics in Action Dave Elliott, CPA, is an...Ch. 10 - Communication Godwin Co. owns three delivery...Ch. 10 - Financial versus tax depreciation The following is...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
Describe the transactions that are recorded in the following equation:

College Accounting (Book Only): A Career Approach

PROJECT SELECTION Midwest Water Works estimates that its WACC is 10.5%. The company is considering the followin...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must some employers file Form 1096?

PAYROLL ACCT.,2019 ED.(LL)-TEXT