Progressive Company reported the following asset values in 2010 and 2011: In addition, in 2011, Progressive had
Question:
In addition, in 2011, Progressive had sales of $4,800,000; cost of goods sold for the year was $2,900,000. As of the end of 2010, the fair value of Progressives total assets was $3,000,000. Of the excess of fair value over book value, $100,000 resulted from the fact that Progressive uses LIFO for inventory valuation. As of the end of 2011, the fair value of Progressives total assets was $3,800,000, and Progressives LIFO reserve was $150,000.
Instructions:
1. Compute Progressives fixed asset turnover ratio for 2011.
2. Using the fair value of fixed assets instead of their book values, recomputed Progressives fixed asset turnover ratio for 2011. State any assumptions that you make.
3. Progressives primary competitor is Steady State. Steady States fixed asset turnover ratio for 2011, based on publicly available information, is 2.5. Is Progressive more or less efficient at using its fixed assets than Steady State? Explain youranswer.
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.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen