Last Year Jain Technologies Had $250 Million of Sales and $100

question 36

Multiple Choice

Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set?

• A) 28.5%
• B) 30.0%
• C) 31.5%
• D) 33.1%
• E) 34.7%

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Definitions:

Operating Profit

The profit earned from a firm's normal core business operations, excluding deductions of interest and tax.

Total Revenue

The overall amount of money generated from sales of goods or services before any expenses are subtracted.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the overall financial gain of a business.

Own Capital

Refers to the funds or resources that a business owner personally invests in their enterprise, as opposed to borrowed capital.