196A company had net sales of $1,540,500 in 2015 and $1,495,000 in 2016. Its average assets were $810,000 for 2015 and $800,000 for 2016. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.
What will be an ideal response?
2015: $1,540,500/$810,000 = 1.90
2016: $1,495,000/$800,000 = 1.87
Interpretation: For every dollar in assets in 2015, the company generated $1.90 in net sales. In 2016 it generated $1.87 in net sales for every dollar of assets. Over the two-year period the company reduced its efficiency in the use of its assets to generate net sales.
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