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5 July, 13:48

A firm has net working capital of $440, net fixed assets of $2,186, sales of $5,500, and current liabilities of $750. How many dollars worth of sales are generated from every $1 in total assets?

a. $1.70

b. $2.52

c. $1.63

d. $1.87

e. $2.09

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  1. 5 July, 14:13
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    c. $1.63

    Explanation:

    We have to calculate the asset turnover which is shown below:

    Total asset turnover = (Sales revenue : Total assets)

    where,

    Sales revenue = $5,500

    The net working capital = Current assets - current liabilities

    $440 = Current asset - $750

    So, the current asset = $750 + $440

    = $1,190

    And, the total asset equal to

    = Fixed asset + current asset

    = $2,186 + $1,190

    = $3,376

    Now the total asset turnover equal to

    = $5,500 : $3,376

    = 1.63
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