Question

The financial statements of Snapit Company are given below.

Snapit Company Income Statement (2009)
Sales	$	4,000,000
Cost of goods sold		3,040,000
Gross profit		960,000
Selling & administrative expenses		430,000
Operating profit		530,000
Interest expense		160,000
Income before tax		370,000
Tax expense		148,000
Net income	$	222,000

Balance Sheet	2009				2008
Cash	$	60,000			$	50,000
Accounts receivable		550,000				500,000
Inventory		690,000				620,000
Total current assets	$	1,300,000			$	1,170,000
Fixed assets		1,300,000				1,230,000
Total assets	$	2,600,000			$	2,400,000
Accounts Payable	$	270,000			$	250,000
Bank loan		580,000				500,000
Total current liabilities	$	850,000			$	750,000
Bond payable		900,000				1,000,000
Total liabilities	$	1,750,000			$	1,750,000
Common stock (130,000 shares)	$	250,000			$	250,000
Retained earnings		600,000				400,000
Total liabilities & equity	$	2,600,000			$	2,400,000

Note: The common shares are trading in the stock market for $100 each.

Refer to the financial statements of Snapit Company. The firm's asset turnover ratio for 2009 is

Multiple Choice

• 3.16.

• 3.31.

• 1.60.

• 4.64.

Answer 1

Answer is 1.6

The firm's asset turnover ratio =Net Sales/Average Total asset

Average Total asset=(2600000+2400000)/2=$2,500,000

firm's asset turnover ratio=4,000,000/2,500,000=1.60