Progressive Company reported the following asset values in 2012 and 2013: In addition, in 2013, Progressive had

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Progressive Company reported the following asset values in 2012 and 2013:
Progressive Company reported the following asset values in 2012 and

In addition, in 2013, Progressive had sales of $4,800,000; cost of goods sold for the year was $2,900,000.
As of the end of 2012, the fair value of Progressive's 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 2013, the fair value of Progressive's total assets was $3,800,000, and Progressive's LIFO reserve was $150,000.
Instructions:
1. Compute Progressive's fixed asset turnover ratio for 2013.
2. Using the fair value of fixed assets instead of their book values, recomputed Progressive's fixed asset turnover ratio for 2013. State any assumptions that you make.
3. Progressive's primary competitor is Steady State. Steady State's fixed asset turnover ratio for 2013, based on publicly available information, is 2.5. Is Progressive more or less efficient at using its fixed assets than Steady State? Explain your answer.

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.
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0538479738

18th edition

Authors: Earl K. Stice, James D. Stice

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