VIPSolutionsA company reported total assets of $400,000 at the beginning of 2023 and $600,000 at the end of the year. During the year, the company earned net income of $75,000 and had total sales revenue of $720,000. What is the asset turnover ratio for the year 2023?
Question:
A company reported total assets of $400,000 at the beginning of 2023 and $600,000 at the end of the year. During the year, the company earned net income of $75,000 and had total sales revenue of $720,000. What is the asset turnover ratio for the year 2023?
This is AI generated Response.
Asked by: Test User 100083
Created at: 2025-04-29 17:06:52
Asked by: Test User 100083
Created at: 2025-04-29 17:06:52
Final Answer:
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Let's break down the problem:
**Given:**
- Beginning total assets (Jan 1, 2023): $400,000
- Ending total assets (Dec 31, 2023): $600,000
- Net income: $75,000 (not needed for asset turnover)
- Total sales revenue: $720,000
**Asset Turnover Ratio Formula:**
\[
\text{Asset Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Total Assets}}
\]
Where:
\[
\text{Average Total Assets} = \frac{\text{Beginning Assets} + \text{Ending Assets}}{2}
\]
**Step 1: Compute Average Total Assets**
\[
\text{Average Total Assets} = \frac{400,000 + 600,000}{2} = \frac{1,000,000}{2} = \$500,000
\]
**Step 2: Compute Asset Turnover Ratio**
\[
\text{Asset Turnover Ratio} = \frac{720,000}{500,000} = 1.44
\]
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### **Final Answer**
\[
\boxed{1.44}
\]
The asset turnover ratio for the year 2023 is **1.44**.
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