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6 April, 07:40

A firm has net working capital of $510, net fixed assets of $2,256, sales of $6,200, and current liabilities of $820. How many dollars worth of sales are generated from every $1 in total assets

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  1. 6 April, 08:00
    0
    For every 1.73 dollars worth of sales are generated from every $1 in total Assets

    Explanation:

    The question asks us to calculate the Total Assets Turnover which measures the company's assets ability to generate sales

    Given NWC = $510, NFA = $2256, Sales = $6200, CL = $820

    TAT = Sales / Total Assets

    Total Assets = NFA + CA

    CA=?

    Net working capital is the difference between a firms current assets with current liabilities

    NWC = CA - CL

    510 = CA - 820

    CA = 510 + 820 = $1330

    TA = 2256 + 1330

    =$3586

    TAT = Sales / Total Assets=6200/3586 = 1.7289/1.73

    This means that for every 1.73 dollar worth of sales are generated from every $1 in total Assets
  2. 6 April, 08:01
    0
    For every $1 of total assets, $1.73 worth of sales are generated.

    Explanation:

    The dollars worth of sales generated for every $1 of total assets can be calculated using the Total Assets Turnover formula.

    Total assets turnover = Net Sales / Net Total Assets

    To calculate this, we need to find the value of total assets.

    The working capital is made up of current assets less current liabilities.

    Thus, the current assets will be = Current liabilities + net working capital

    Current Assets = 820 + 510 = 1330

    Total Assets = 1330 + 2256 = $3586

    So total assets turnover = 6200 / 3586 = 1.7289 rounded off to 1.73.
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