Question

Apple Google One Two One Two Current Year Years Current Year Years ($ millions) Year Prior Prior Year Prior Prior Total assets $207.000 $176,064 $116,37 $110,920 $93,798 $72.574 170,910 Net sales 156,508 108.249 59.825 50,175 37,905

1. Compute total asset turnover for the most recent two years for Apple and Google using the data shown. 2. Which company is more efficient in generating net sales given the total assets it employs? Assume an industry average of 1.0 for asset turnover.

2. Which company is more efficient in generating net sales given the total assets it employs? Assume an industry average of 1.0 for asset turnover.

1. Compute total asset turnover for the most recent two years for Samsung using the data shown.
2. Which company is most efficient in generating net sales given the total assets it employs?

Answer 1

Asset turnover = Net sales/Total average assets

Apple

Google

	Net sales (a)	Average assets (b)	Ratio (a/b)	Net sales (c)	Average assets (d)	Ratio (c/d)
Current year	170,910	(270,000 + 176,064)/2 = 191,533	0.89	59,825	(110,920 + 93,798)/2 = 102,359	0.58
Prior year	156,508	(176,064 + 116,371)/2 = 146,218	1.07	50,175	(93,798 + 72,574)/2 = 83,186	0.60

Out of these two companies Apple is more efficient in generating the net sales on its assets employeed. But considering the industry average of 1.0, Apple is not efficient as industry as its ratio is under 1 in current year

Samsung

	Net sales (a)	Average assets (b)	Ratio (a/b)
Current year	228,692.667	(214,075.018 + 181,071.570)/2 = 197,573.294	1.18
Prior year	201,103.613	(181,071.570 + 155,800.263)/2 = 168,435.9165	1.19

Out of the three companies, Samsung is the highly efficient company in generating net sales on its assets employeed, also its ratio is more than the industry average i.e. 1.18 in current year and 1.19 is prior year.