Ratio of sales to assets
Financial statement data for years ending December 31 for Edison Company follows:
a. Determine the ratio of sales to assets for 2016 and 2015.
b. Does the change in the ratio of sales to assets from 2015 to 2016 indicate a favorable or an unfavorable trend?
a.
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:
The asset turnover for 2016 and 2015 for Company E.
Working Notes:
Calculate the average total assets.
Beginning assets = $770,000
Ending assets = $800,000
Calculate the asset turnover for 2015.
Sales/ net revenue = $1,568,000
Average total assets = $710,000 (2)
b.
To Comment: Whether the change in the asset turnover from 2015 to 2016 indicate a favorable or an unfavorable trend.
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