Deflorio Corporation’s inventory at the end of Year 2 was $167,000 and its inventory at the end of Year 1 was $152,000. The company’s total assets at the end of Year 2 were $1,471,000 and its total assets at the end of Year 1 were $1,420,000. Sales amounted to $1,450,000 in Year 2. The company’s total asset turnover for Year 2 is closest to:

Options:

0.98

1.03

9.28

9.06

Correct answer is A 0.98

Explanation:

Total asset turnover = Sales / Average total assets.

Sales = $ 1390000 (Given in the question)

Average total assets = (1446000 + 1404000) / 2

= $ 1425000.

Accordingly, Total asset turnover of company for the Year 2

= 1390000 / 1425000

= 0.98 (Option A)

The assets turnover is closest to 1.003 times

Explanation:

The total assets turnover ratio is an important ratio to assess the efficiency of a firm's assets in generating revenue. The ratio calculated the $ value of revenue generated by each $1 of the asset.

The formula for total assets turnover is:

Total Assets turnover = net Sales / Average net total assets

The average net total assets = (Opening value of assets + Closing value of assets) / 2

Thus, the assets turnover is:

Average net total assets =  (1420000 + 1471000) / 2 = 1445500

Assets turnover =  1450000 / 1445500 = 1.003 times

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