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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Asset turnover

Kroger Co., a national supermarket chain, reported the following data (in millions) in its financial statements for a recent year:

Total revenue $108,465
Total assets at end of year 30,556
Total assets at beginning of year 29,281
  1. a. Compute the asset turnover. Round to two decimal places.
  2. b. Tiffany & Co. is a large North American retailer of jewelry with an asset turnover of 0.86. Why would Tiffany’s asset turnover be lower than that of Kroger?

a.

To determine

Asset turnover ratio is used to determine the efficiency of the company towards use of asset towards generation of sales. The formula to calculate asset turnover is given below:

Assetturnover=NetrevenueAverage total assets

To Determine: The asset turnover for Company K.

Explanation

Calculate the asset turnover.

Sales/ net revenue = $108,465

Average total assets = $29,918.5 (1)

Assetturnover=NetrevenueAverage total assets=$108,465$29,918.5=3.63times

Working Notes:

Calculate the average total assets

b.

To determine

To Comment: Why Company T’s asset turnover is lower than Company K.

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