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30 November, 08:03

The BobCat Inc. reported gross sales of $100,000, sales returns and allowances of $5,000, and sales discounts of $2,000. The company has $25,000 in tangible assets and $120,000 in average total assets. What is the company's asset turnover ratio

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  1. 30 November, 11:15
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    Answer:0.775 times

    Explanation:

    Given

    Gross sales 100000

    Sales returns 5000

    Sales discounts 2000

    Tangible assets 25000

    Average total assets 120000

    Calculation of assets turn over ratio

    Assets turnover ratio = Net sales / Average total assets

    = (100000-5000-2000) / 120000

    =0.775 times

    Assets turnover ratio is 0.775 times

    Gross sales is the sales made by the company but net sales is where the actual value of sales has happened after the rebates, allowances and discounts. Assets turn over ratio is used to measure the company's abilities to utilize its assets efficiently in generating sales income to the company.
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