Jim Short’s Company makes clothing for schools. Sales in 20X1 were $4,890,000. Assets were as follows:

Cash	$ 104,000
Accounts receivable	859,000
Inventory	427,000
Net plant and equipment	591,000
Total assets	$ 1,981,000
Compute the following:

Note: Round your answers to 2 decimal places.



In 20X2, sales increased to $5,430,000 and the assets for that year were as follows:

Cash	$ 104,000
Accounts receivable	991,000
Inventory	1,053,000
Net plant and equipment	591,000
Total assets	$ 2,739,000
Compute the following:

Note: Round your answers to 2 decimal places.



Is there an improvement or a decline in the total asset turnover?

multiple choice
Decline
Improvement

To solve the problem, we will calculate **total asset turnover** for both years 20X1 and 20X2 using the formula:

\[
\text{Total Asset Turnover} = \frac{\text{Sales}}{\text{Total Assets}}
\]

### Step 1: Calculate Total Asset Turnover for 20X1
\[
\text{Total Asset Turnover (20X1)} = \frac{4,890,000}{1,981,000}
\]

### Step 2: Calculate Total Asset Turnover for 20X2
\[
\text{Total Asset Turnover (20X2)} = \frac{5,430,000}{2,739,000}
\]

### Step 3: Compare the two values to determine whether there is an **improvement** or a **decline** in the total asset turnover.

Let me calculate these values.The total asset turnover is:

- **2.47** for 20X1
- **1.98** for 20X2

Since the total asset turnover decreased from 2.47 to 1.98, there is a **decline** in the total asset turnover.

The correct choice is **Decline**.

Would you like more details on this calculation or have any further questions?

Here are 5 related questions to expand on this:
1. What does a decline in total asset turnover indicate about a company's efficiency?
2. How can Jim Short’s Company improve its asset turnover?
3. How is total asset turnover linked to a company’s profitability?
4. What other financial ratios could be useful in evaluating the company’s performance?
5. How does inventory management affect asset turnover?

**Tip:** Monitoring changes in financial ratios like total asset turnover helps assess how efficiently a company uses its assets to generate sales.

Jim Short’s Company makes clothing for schools. Sales in 20X1 were $4,890,000. Assets were as follows:
Cash $104,000
Accounts receivable $859,000
Inventory $427,000
Net plant and equipment $591,000
Total assets $1,981,000
Compute the following:

In 20X2, sales increased to $5,430,000 and the assets for that year were as follows:
Cash $104,000
Accounts receivable $991,000
Inventory $1,053,000
Net plant and equipment $591,000
Total assets $2,739,000
Compute the following:

Is there an improvement or a decline in the total asset turnover?
Multiple choice:
Decline
Improvement

Learn how to calculate and analyze the total asset turnover for Jim Short’s Company in 20X1 and 20X2. Sales increased from $4,890,000 to $5,430,000, while assets grew from $1,981,000 to $2,739,000. This analysis focuses on key financial ratios to determine if there was an improvement or decline in efficiency.

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