A Firm Has Sales of $5 Million, Average Total Assets

question 32

Essay

A firm has sales of $5 million, average total assets of $1.6 million, average fixed assets of $1 million, and average current liabilities of $300,000. Given this information, answer the following about the firm's efficiency:
a. Calculate asset turnover, fixed asset turnover, and NWC turnover ratios.
b. Can the fixed asset turnover be considered appropriate and yet the total asset turnover be considered low by industry standards? How?
c. What in general might improve NWC turnover?

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Definitions:

Defenses

Arguments and strategies used in legal proceedings by the defendant to challenge, mitigate, or nullify the claims made by the plaintiff.

Equity Credit

The provision of credit or financing based on the borrower's ownership stakes in assets rather than on their creditworthiness alone.

Negotiable Instrument

A written promise to pay a certain sum of money, which can be demanded or paid at an agreed time, specifying the person responsible for payment in the document.

Holder

An individual or entity that legally owns or possesses a document, instrument, or title.