Progressive Company reported the following asset values in 2014 and 2015:

In addition, in 2015, Progressive had sales of $4,800,000; cost of goods sold for the year was $2,900,000.
As of the end of 2014, the fair value of Progressive's total assets was $3,000,000. Of the excess of fair value over book value, $100,000 resulted from the fact that Progressive uses LIFO for inventory valuation. As of the end of 2015, the fair value of Progressive's total assets was $3,800,000, and Progressive's LIFO reserve was $150,000.
Instructions:
1. Compute Progressive's fixed asset turnover ratio for 2015.
2. Using the fair value of fixed assets instead of their book values, re-compute Progressive's fixed asset turnover ratio for 2015. State any assumptions that you make.
3. Progressive's primary competitor is Steady State. Steady State's fixed asset turnover ratio for 2015, based on publicly available information, is 2.5. Is Progressive more or less efficient at using its fixed assets than Steady State? Explain your answer.

Transcribed Image Text:

2015 2014 50,000 45,000 00,000 220,000 50,000 510 600,000 00,000 800,000 50,000 250,000 Cash Accounts receivable. land 400000 Equipment.