Understanding Operating Assets UN You have been . asked to evaluate two companies and have acquired the following information:

. Compute the fixed asset turnover ratios (sales/fixed assets)
and total asset turnover ratios (sales/total assets) for the companies. Which company appears to be the more desirable investment on the basis of these ratios?
. Compute the margin on sales ratio (net income/sales) and return on total assets ratio (net income/total assets) for the two companies. Which company appears to be the more desirable investment on the basis of these ratios?
. What factors may make it possible for Company B to have a smaller investment in fixed assets and still report more than double the sales of Company L?
. Although Company B reports greater net income than Company L, explain why it may be desirable to invest in Company L rather than Company B.

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Company B Company L Total sales for 2001 $900.000 $400,000 Net income 85.000 60,000 Fixed assets 150.000 250,000 Total assets 600.000 300,000