Question

Green Yard Care has net income of $62,300, a tax rate of 21 percent, and a profit margin of 6.7 percent. Total assets are $1,100,500 and current assets are $328,200. How many dollars of sales are being generated from every dollar of net fixed assets?

Answer 1

Calculation of Fixed Assets Turnover ratio (How many dollars of sales are being generated from every dollar of net fixed assets):

We can calculate Assets Turnover ratio using the following formula;

Fixed Assets Turnover ratio = Net Sales / Fixed Assets

We are given that Green Yard Care has net income of $62,300, and a profit margin of 6.7 percent. That mean Net Sales = 62300/6.7% = $928,850.75.

And Fixed Assets = $1,100,500  - $328,200 = $772,300

Now we can calculate Assets Turnover ratio as follows:

Fixed Assets Turnover ratio = Net Sales / Fixed Assets

= $928,850.75 / $772300

= 1.2027

Hence we can say $1.2027 dollars of sales are being generated from every dollar of net fixed assets.