ANALYZE FIXED ASSETS Tabor Industries is a technology company that operates in a highly competitive environment. In 2006, management had significantly curtailed its capital expenditures due to cash flow problems. Tabor reported the following information for 2009:

. Net fixed assets (beginning of year) $489,000

. Net fixed assets (end of year) 505,000

. Net sales 1,065,000

. Accumulated depreciation (end of year) 543,000

. Depreciation expense 116,000 An analyst reviewing Tabor’s financial history noted that Tabor had previously reported fixed asset turnover ratios and average age of its assets as follows:

2004 2005 2006 2007 2008 Fixed asset turnover 2.48 2.45 2.74 2.57 2.33 Average age of assets (years) 1.81 1.79 1.94 2.81 3.74 During this time frame, the industry average fixed asset turnover ratio is 2.46 and the industry average age of assets is 1.79 years.

Required:

. Compute Tabor’s fixed asset turnover ratio.

. Compute the average age of Tabor’s fixed assets.

. Comment on Tabor’s fixed asset turnover ratios and the average age of the fixed assets.

Exercise