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30 May, 08:44

A firm's total equity is $10 million and total liabilities is $5 million. During the year, its sales equaled to $75 million. Based on the given information, the total assets turnover ratio of the firm is:

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  1. 30 May, 09:03
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    5 times

    Explanation:

    The formula and the computation of the total asset turnover is shown below:

    As we know that

    Total asset turnover = (Sales) : (Total assets)

    The sales = $75 million

    And, the total assets equal to

    = Total equity + total liabilities

    = $10 million + $5 million

    = $15 million

    For computing the total assets value, we applied the accounting equation

    So, the total asset turnover is

    = $75 million : $15 million

    = 5 times
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