Question

17
qs 8-21 (algo) computing total asset turnover lo a1
aneko company reports the following: net sales of $19,000 for year 2 and $18,050 for year 1; end-of-year total assets of $18,600 for year 2 and $17,400 for year 1.
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anekos competitor has a turnover of 2.0. is aneko performing better or worse than its competitor based on total asset turnover?
is aneko performing better or worse than its competitor based on total asset turnover?

Explanation:

Step1: Calculate avg. assets (Year2)

Average total assets = $\frac{\text{Year 1 end assets} + \text{Year 2 end assets}}{2} = \frac{\$17,400 + \$18,600}{2} = \$18,000$

Step2: Compute total asset turnover

Total asset turnover = $\frac{\text{Year 2 net sales}}{\text{Average total assets}} = \frac{\$19,000}{\$18,000} \approx 1.06$

Step3: Compare to competitor's ratio

Aneko's turnover (1.06) < Competitor's (2.0)

Answer:

Aneko is performing worse than its competitor based on total asset turnover.