Review the chapter’s opening feature involving Games2U. Assume that the company currently has net sales of $8,000,000, and that it is planning an expansion that will increase net sales by $4,000,000. To accomplish this expansion, Games2U must increase its average total assets from $2,500,000 to $3,000,000.

Required

1. Compute the company’s total asset turnover under (a) current conditions and (b) proposed conditions.

2. Evaluate and comment on the merits of the proposal given your analysis in part 1. Identify any concerns you would express about the proposal.