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Total Asset Turnover Discussion

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1) Your company's balance sheet includes the following data for 2012: Current assets = $1 million. Cash = $100,000. Inventory = $500,000. Current liabilities = $800,000. Accounts receivable = $100,000. Accounts payable = $90,000. long-term debt = $1 million. Total liabilities and stockholders' equity = $3 million. On the income statement, net income for 2012 is $500,000. Net sales are $2.7 million. Common stock is selling for $12. 1 million shares of common stock are outstanding. Calculate the current ratio for your company.
2) Use the information from Question 1 to calculate your company's total asset turnover.
3) Use the information in Question 1 above to calculate accounts receivable turnover. Assume all sales are made on credit.
4) Which profit margin measures the overall operating efficiency of the company?
5) The big three profitability ratios (gross profit margin, operating profit margin, and net profit margin) can be found directly on...
6) What does a financial leverage index greater than one indicate about a company?
7) The average collection period is ______________ and evaluates the firm's ______________.

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1) Your company's balance sheet includes the following data for 2012: Current assets = $1 million. Cash = $100,000. Inventory = $500,000. Current liabilities = $800,000. Accounts receivable = $100,000. Accounts payable = $90,000. Long-term debt = $1 million. Total liabilities and stockholders' equity = $3 million. On the income statement, net income for 2012 is $500,000. Net sales are $2.7 million. Common stock is selling for $12. 1 million shares of common stock are outstanding. Calculate the current ratio for your company.
Current ratio = Current assets/Current liabilities
 $1,000,000/$800,000
 1.25

2) Use the information from Question 1 to calculate your company's total asset turnover.
Total asset turnover = Sales/Total assets
Here, total assets amount is not given directly. We can find the total assets by using the equation:
Total assets = Total liabilities and stockholder's equity = $3 million
Therefore, total asset turnover = ...

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