Bountiful Company had sales of $650,000 and cost of merchandise sold of $200,000 during the year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of sales to total assets. a. 3.80 b. 0.26 c. 3.00 d. 0.29

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Business

Evie Rose

17 October, 14:52

Bountiful Company had sales of $650,000 and cost of merchandise sold of $200,000 during the year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of sales to total assets. a. 3.80 b. 0.26 c. 3.00 d. 0.29

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Alexandria Pearson · Answer 1

a. 3.80

Explanation:

This ratio is also called sales turnover.

This represent how much a dollar invested in asset can increase sales.

A higher ratio increase the profitability of the company and represent the efficiency of the assets in the business.

sales/average assets = sales to assets ratio

where:

average assets = (beginning assets + ending assets) / 2

(175,000 + 167,000) / 2 = 171,000

sales to assets:

650,000 / 171,000 = 3.801169 = 3.80