Progressive Company reported the following asset values in 2014 and 2015: In addition, in 2015, Progressive had

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Progressive Company reported the following asset values in 2014 and 2015:
Progressive Company reported the following asset values in 2014 and

In addition, in 2015, Progressive had sales of $4,800,000; cost of goods sold for the year was $2,900,000.
As of the end of 2014, 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 2015, 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 2015.
2. Using the fair value of fixed assets instead of their book values, re-compute Progressive's fixed asset turnover ratio for 2015. State any assumptions that you make.
3. Progressive's primary competitor is Steady State. Steady State's fixed asset turnover ratio for 2015, 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: 978-1133957911

19th edition

Authors: Earl K. Stice, James D. Stice

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