Redribbon Gallery reported the following assets on its December 31, 2017 balance sheet
Dec. 31, 2017 Dec. 31, 2016
Cash $35,000 $28,000
Accounts Receivable 97,000 85,000
Merchandise Inventory 80,000 62,000
Prepaid Expenses 29,000 20,000
Property, plant, and equipment, net 30,000 18,000
If the net sales for the year amounted to $850,000, what is the asset turnover ratio for 2017?
What will be an ideal response
Dec. 31, 2017 Dec. 31, 2016
Cash $35,000 $28,000
Accounts Receivable 97,000 85,000
Merchandise Inventory 80,000 62,000
Prepaid Expenses 29,000 20,000
Property, plant, and equipment, net 30,000 18,000
Total $271,000 $213,000
Asset turnover ratio = Net sales / Average total assets
Average total assets = ($271,000 + $213,000 ) / 2 = $242,000
Asset turnover ratio = $850,000 / $242,000 = 3.51 times (rounded)
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