Chapter 8, Problem 5BTN

Review the chapter’s opening feature involving Deb and Dan Carey and their company, New Glarus Brewing Company. 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, the company 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 the analysis in part 1. Identify any concerns we would express about the proposal.