Question

Requirement 3: C-1. Calculate the asset turnover ratio for the month of January. Answer is complete but not entirely correct. Choose Numerator Asset Turnover Ratio Asset Turnover Ratio Choose Denominator Average Total Assets $ 420,225 X = Net Sales $ 226,000 Asset Turnover 0.54 times + c-2. If the industry average asset turnover is 0.4 times per month, is the company more or less efficient at producing revenues with its assets than other companies in the same industry? • More efficient Less efficient

Answer 1

	Computation of Net Income
	Sales Revenue	$2,26,000
Less:	Cost of goods sold	$1,18,000
Less:	Gross Profit	$1,08,000
Less:	Depreciation expenses	$375
Less:	Bad debt expenses	$5,780
Less:	Salaries expenses	$63,600
Less:	Utilities expenses	$17,100
Add:	Interest Revenue	$80
	Net Income before taxes	$21,225
Less:	Income tax expenses	$9,600
	Net Income	$11,625
	Computation of Total Assets
	Cash	$4,200
	Accounts Receivable($229,600-8580)	$2,21,020
	Inventory	$7,800
	Note Receivable	$19,200
	Land	$1,61,000
	Equipment, net of depreciation($20100-375)	$19,725
	Interest Receivable	$80
	Total Assets	$4,33,025
	Return on Asset =$11,625 / $433,025 =2.68% or 2.7%
	Profit Margin ratio =$11,625 / $226,000 =5.14% or 5.1%