From the given income statement and additional information of Chelsea Co., compute the following: a. Asset turnover
Question:
a. Asset turnover for 2013
b. Inventory turnover for 2013
c. Accounts receivable turnover for2013 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.
Net Sales Cost of Goods Sold Gross Profit Operating Expenses (includes taxes) Net Income 2013 $800,000 350,000 $450,000 150,000 $300,000 2012 600,000 200,000 $400,000 100,000 300,000 2013 Year-End Accounts Receivable Year-End Invento All sales were on credit 2012 30,000 30,000 $130,000 70,000 Total Assets 320,000 80,000
Step by Step Answer:
a Net sales Total assets Asset turnover 800000 32...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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