A company had net sales of $230,000 for Year 1 and $288,000 for Year 2. The company's average total assets for Year 1 were $150,000 and $180,000 for Year 2. Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.
What will be an ideal response?
Year 1: $230,000/$150,000 = 1.53
Year 2: $288,000/$180,000 = 1.60
In Year 1, for every dollar of assets, the company earned $1.53 in net sales.
This increased to $1.60 in net sales for every dollar of assets in Year 2.
Its efficiency in the use of its assets improved from Year 1 to Year 2.
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