Exercise 10- 22 Evaluating efficient use of assets A1 Lok Co. reports net sales of $ 5,856,480

Question:

Exercise 10- 22 Evaluating efficient use of assets A1 Lok Co. reports net sales of $ 5,856,480 for 2012 and $ 8,679,690 for 2013. End-of-year balances for total assets are 2011, $ 1,686,000; 2012, $ 1,800,000; and 2013, $ 1,982,000.

(a) Compute Lok’s total asset turnover for 2012 and 2013.

(b) Comment on Lok’s efficiency in using its assets if its competitors average a total asset turnover of 3.0.

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.