Chapter 11, Problem 11.4SE

Kenichi Industries had $420 million in sales last year and $310 million in fixed assets that were used at 70% of capacity. In millions, by how much could Kenichi's sales increase before it is required to increase its fixed assets?

Atlas Corp's sales last year were $365,000, and its year-end total assets were $410,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.6. The firm's new CFO believes the firm has excess assets that can be sold to bring the TATO down to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant?

General accounting question