Let's look at total asset turnover in Exhibit 10.19 for two competing companies: Starbucks and Jack...

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Let's look at total asset turnover in Exhibit 10.19 for two competing companies: Starbucks and Jack in the Box. To show how we use total asset turnover, let's look at Starbucks. We express Starbucks's use of assets in generating net sales by saying, "it turned its assets over 1.22 times during the current year." This means that each $1.00 of assets produced $1.22 of net sales. EXHIBIT 10.19 Analysis Using Total Asset Turnover Figure ($ millions) Current Year 1 Year Ago 2 Years Ago Company Starbucks Net sales $26,509 $24,720 $22,387 Average total assets $21,688 $19,261 $14,339 Total asset turnover 1.22 1.28 1.56 Jack in the Box Net sales $950 $870 $1,097 Average total assets Total asset turnover $891 $1,029 $1,290 1.07 0.85 0.85 Is a total asset turnover of 1.22 good or bad? All companies want a high total asset turnover. Interpreting the total asset turnover requires an understanding of company operations. Some operations are capital-intensive, meaning that a relatively large amount is invested in plant assets to generate sales. This results in a lower total asset turnover. Other companies' operations are labor-intensive, meaning that they generate sales using people instead of assets. In that case, we expect a higher total asset turnover. Starbucks's turnover is higher than that for Jack in the Box. However, Starbucks's total asset turnover decreased over the last three years. To maintain a strong total asset turnover, Starbucks must grow sales at a rate equal to, or higher than, its total asset growth. Let's look at total asset turnover in Exhibit 10.19 for two competing companies: Starbucks and Jack in the Box. To show how we use total asset turnover, let's look at Starbucks. We express Starbucks's use of assets in generating net sales by saying, "it turned its assets over 1.22 times during the current year." This means that each $1.00 of assets produced $1.22 of net sales. EXHIBIT 10.19 Analysis Using Total Asset Turnover Figure ($ millions) Current Year 1 Year Ago 2 Years Ago Company Starbucks Net sales $26,509 $24,720 $22,387 Average total assets $21,688 $19,261 $14,339 Total asset turnover 1.22 1.28 1.56 Jack in the Box Net sales $950 $870 $1,097 Average total assets Total asset turnover $891 $1,029 $1,290 1.07 0.85 0.85 Is a total asset turnover of 1.22 good or bad? All companies want a high total asset turnover. Interpreting the total asset turnover requires an understanding of company operations. Some operations are capital-intensive, meaning that a relatively large amount is invested in plant assets to generate sales. This results in a lower total asset turnover. Other companies' operations are labor-intensive, meaning that they generate sales using people instead of assets. In that case, we expect a higher total asset turnover. Starbucks's turnover is higher than that for Jack in the Box. However, Starbucks's total asset turnover decreased over the last three years. To maintain a strong total asset turnover, Starbucks must grow sales at a rate equal to, or higher than, its total asset growth.