The following data have been extracted from the financial statements of a firm for two years, 1991 and 1992:
1991 1992
Assets 9,947 9,682 -
Sales 11,035 10,377 -
Current liabilities 4,193 3,920
Non-current liabilities 3,827 3,476
The asset turnover and the equity turnover for 1992 equal ________.
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A. B. C. D.B
Total asset turnover = net sales/average total assets
Total equity turnover = net sales/average equity
The total liabilities in 1991 = 4,193 + 3,827 = 8,020 and total liabilities in 1992 = 3,920 + 3,476 = 7,396. Therefore, using the equation,
Total Assets = Total Liabilities + Total Equity,
the equity in 1991 was 9,947 - 8020 = 1,927 and in 1992, it was 9,682 - 7,396 = 2,286. Thus, the average equity for 1992 equals (1,927 + 2,286)/2 = 2,107 and average assets for 1992 equal (9,682 + 9,947)/2 = 9,815. Therefore, asset turnover for 1992 = 10,377/9,815 = 1.06 and equity turnover = 10,377/2,107 = 4.93.