/Activity 8RATIO ANALYSISAsset TurnoverUnderstand the information provided by the asset turnover ratio.• Identify the expected range and whether an increasing or decreasing trend is preferred.Purpose:The asset turnover ratio compares net sales to total assets. This ratio evaluates how efficiently assets are usedto produce net sales. It is one measure of sales volume. It is a measure of profitability.Net salesASSET TURNOVER =Average total assets1. Average total assets = [(beginning assets + ending assets) / 2].12/31/98 assets are the ending assets of (1998 / 1999) and the beginning assets of (1998 / 1999).GENERALMOTORS (GM).($ in 000s)GẶP INCНОME DEPЮТORACLEfye 1/30/99$9.054.462fye 12/31/98$161.315.000fye 1/31/99$30,219.000fye 5/31/99$8,827,252Net sales1/30/9912/31/98$257.389.0001/31/99$13.465,0005/31/99$7.259,654Total assets$3.963,9191/30/98$3.337.502Sourçe: Disclosure, Inc., Compact D/SEC, 2000.12/31/97$231.752.0001/31/98$11,229.0005/31/98.$5,819.011Total assets2. For each company listed above, compute the average total assets for the most recent fiscal year. Recordyour results below (in 000s).Average total assets:$3,650,7112$3. For each company listed above, compute the asset turnover ratio. Record your results below.Asset turnover ratio:2.484. The asset turnover ratios computed above are primarily in the range(less than 1/1 through 3 / more than 3).5. The corporation with the strongest asset turnover ratio is (Gap Inc / GM/Home Depot / Oracle).6. For the asset turnover ratio, an (increasing / decreasing) trend is favorable and indicates effective use ofassets to produce net sales.7. Home Depot makes profits by generating a large volume of sales on items with low prices. The assetturnover ratio is one measure of sales volume. Therefore, the asset turnover ratio for Home Depot isexpected to be relatively (high / low).8. Fortune Magazine rated (Gap Inc / GM / Home Depot / Oracle) Number 1, indicating it is the largestcorporation in the United States.

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Description: /Activity 8RATIO ANALYSISAsset TurnoverUnderstand the information provided by the asset turnover ratio.• Identify the expected range and whether an increasing or decreasing trend is preferred.Purpose:The asset turnover ratio compares net sales to to

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1. Average total assets = [(beginning assets +ending assets) / 2]. 12/31/98 assets are the ending assets of (1998 / 1999) and the beginning assets of (1998 / 1999). ($ in 000s) GENERAL MOTORS (GM) GẶP INC НOME DEPЮТ ORACLE fye 1/30/99 $9.054.462 fye 12/31/98 $161.315.000 fye 1/31/99 $30,219.000 fye 5/31/99 $8,827,252 Net sales 1/30/99 $3.963.919 12/31/98 $257.389.000 1/31/99 Total assets 5/31/99 $7.259,654 $13.465,000 1/30/98. Total assets Sourçe: Disclosure, Inc., Compact D/SEC, 2000. 12/31/97 $231.752.000 1/31/98 $11,229.000 5/31/98. $5.819.011 $3.337,502 2. For each company listed above, compute the average total assets for the most recent fiscal year. Record your results below (in 000s). Average total assets: $3,650,711 $. 3. For each company listed above, compute the asset turnover ratio. Record your results below. Asset turnover ratio: 2.48

1. Average total assets = [(beginning assets +ending assets) / 2]. 12/31/98 assets are the ending assets of (1998 / 1999) and the beginning assets of (1998 / 1999). ($ in 000s) GENERAL MOTORS (GM) GẶP INC НOME DEPЮТ ORACLE fye 1/30/99 $9.054.462 fye 12/31/98 $161.315.000 fye 1/31/99 $30,219.000 fye 5/31/99 $8,827,252 Net sales 1/30/99 $3.963.919 12/31/98 $257.389.000 1/31/99 Total assets 5/31/99 $7.259,654 $13.465,000 1/30/98. Total assets Sourçe: Disclosure, Inc., Compact D/SEC, 2000. 12/31/97 $231.752.000 1/31/98 $11,229.000 5/31/98. $5.819.011 $3.337,502 2. For each company listed above, compute the average total assets for the most recent fiscal year. Record your results below (in 000s). Average total assets: $3,650,711 $. 3. For each company listed above, compute the asset turnover ratio. Record your results below. Asset turnover ratio: 2.48

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

/Activity 8
RATIO ANALYSIS
Asset Turnover
Understand the information provided by the asset turnover ratio.
• Identify the expected range and whether an increasing or decreasing trend is preferred.
Purpose:
The asset turnover ratio compares net sales to total assets. This ratio evaluates how efficiently assets are used
to produce net sales. It is one measure of sales volume. It is a measure of profitability.
Net sales
ASSET TURNOVER =
Average total assets
1. Average total assets = [(beginning assets + ending assets) / 2].
12/31/98 assets are the ending assets of (1998 / 1999) and the beginning assets of (1998 / 1999).
GENERAL
MOTORS (GM).
($ in 000s)
GẶP INC
НОME DEPЮТ
ORACLE
fye 1/30/99
$9.054.462
fye 12/31/98
$161.315.000
fye 1/31/99
$30,219.000
fye 5/31/99
$8,827,252
Net sales
1/30/99
12/31/98
$257.389.000
1/31/99
$13.465,000
5/31/99
$7.259,654
Total assets
$3.963,919
1/30/98
$3.337.502
Sourçe: Disclosure, Inc., Compact D/SEC, 2000.
12/31/97
$231.752.000
1/31/98
$11,229.000
5/31/98.
$5,819.011
Total assets
2. For each company listed above, compute the average total assets for the most recent fiscal year. Record
your results below (in 000s).
Average total assets:
$3,650,711
2$
3. For each company listed above, compute the asset turnover ratio. Record your results below.
Asset turnover ratio:
2.48
4. The asset turnover ratios computed above are primarily in the range
(less than 1/1 through 3 / more than 3).
5. The corporation with the strongest asset turnover ratio is (Gap Inc / GM/Home Depot / Oracle).
6. For the asset turnover ratio, an (increasing / decreasing) trend is favorable and indicates effective use of
assets to produce net sales.
7. Home Depot makes profits by generating a large volume of sales on items with low prices. The asset
turnover ratio is one measure of sales volume. Therefore, the asset turnover ratio for Home Depot is
expected to be relatively (high / low).
8. Fortune Magazine rated (Gap Inc / GM / Home Depot / Oracle) Number 1, indicating it is the largest
corporation in the United States.

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