From the given income statement and additional information of Carbone Co., compute the following: a. Asset turnover
Question:
a. Asset turnover for 2016
b. Inventory turnover for 2016
c. Accounts receivable turnover for 2016
Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
2016 $840,000 726,000 2015 Net Sales Cost of Goods Sold Gross Profit Operating Expenses (includes taxes) Net Income $780,000 494,000 $114,000 $286,000 169,000 42,000 5117.000 72,000 2016 60,000 92,000 2015 35,000 70,000 Year-End Accounts Receivable Year-End Inventory All sales were on credit Total Assets 230,000 185,000
Step by Step Answer:
a Net sales Total assets Asset turnover 840000 23...View the full answer
College Accounting A Practical Approach Chapters 1-25
ISBN: 9780133791006
13th Edition
Authors: Jeffrey Slater
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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