Math Problem Statement

At year-end 2002, Yung.com had notes payable of $1200, accounts payable of $2400, and long-term debt of $6000. Corresponding entries for 2003 are $1600, $2000, and $5000. Asset values are below. During 2003, Yung.com had sales of $2000, cost of goods sold of $400, depreciation of $100, and interest paid of $150. The (average) tax rate is 21% and all taxes are paid currently. Current Asset 2002 2003 Cash $400 $1000 Marketable securities 400 300 Accounts receivable 900 800 Inventory 1800 2000 Fixed Assets Net Fixed Asset (Plant&Equipment) $6000 $2000 In 2003, the Total Asset Turnover ratio is ______________ (Keep the sign and two decimal numbers.)

Solution

The Total Asset Turnover (TAT) ratio is calculated as:

Total Asset Turnover=SalesAverage Total Assets\text{Total Asset Turnover} = \frac{\text{Sales}}{\text{Average Total Assets}}

Where:

  • Sales for 2003 is given as $2000.
  • Average Total Assets is the average of total assets at the end of 2002 and 2003.

Step 1: Calculate Total Assets for 2002 and 2003

Total Assets for 2002: Total Assets 2002=Cash+Marketable Securities+Accounts Receivable+Inventory+Net Fixed Assets\text{Total Assets 2002} = \text{Cash} + \text{Marketable Securities} + \text{Accounts Receivable} + \text{Inventory} + \text{Net Fixed Assets} Total Assets 2002=400+400+900+1800+6000=9500\text{Total Assets 2002} = 400 + 400 + 900 + 1800 + 6000 = 9500

Total Assets for 2003: Total Assets 2003=Cash+Marketable Securities+Accounts Receivable+Inventory+Net Fixed Assets\text{Total Assets 2003} = \text{Cash} + \text{Marketable Securities} + \text{Accounts Receivable} + \text{Inventory} + \text{Net Fixed Assets} Total Assets 2003=1000+300+800+2000+2000=6100\text{Total Assets 2003} = 1000 + 300 + 800 + 2000 + 2000 = 6100

Step 2: Calculate the Average Total Assets

Average Total Assets=Total Assets 2002+Total Assets 20032\text{Average Total Assets} = \frac{\text{Total Assets 2002} + \text{Total Assets 2003}}{2} Average Total Assets=9500+61002=156002=7800\text{Average Total Assets} = \frac{9500 + 6100}{2} = \frac{15600}{2} = 7800

Step 3: Calculate Total Asset Turnover Ratio

Total Asset Turnover=20007800=0.26\text{Total Asset Turnover} = \frac{2000}{7800} = 0.26

Final Answer:

0.26\boxed{0.26}

Would you like more details or have any questions?

Here are some related questions:

  1. What other ratios can be calculated using Total Assets?
  2. How does depreciation affect Total Assets in the calculation?
  3. Why is Total Asset Turnover important for a business?
  4. What are the implications of a low Total Asset Turnover ratio?
  5. How would an increase in accounts receivable affect the Total Asset Turnover ratio?

Tip: The Total Asset Turnover ratio measures how efficiently a company uses its assets to generate sales. Higher values indicate better efficiency.

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Math Problem Analysis

Mathematical Concepts

Accounting Ratios
Total Asset Turnover
Averages

Formulas

Total Asset Turnover = Sales / Average Total Assets
Average Total Assets = (Total Assets 2002 + Total Assets 2003) / 2
Total Assets = Cash + Marketable Securities + Accounts Receivable + Inventory + Net Fixed Assets

Theorems

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Suitable Grade Level

College-level Finance

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