Answer: 2.5
Explanation:
The Turnover (Asset Utilization) is calculated by dividing the business Turnover (Sales) by it's Assets.
We have the amount of assets (Investment). Now we have to calculate the Sales.
The Net Income was 12.5% of $100,000 so solving for that would be,
= 0.125 * 100,000
= $12,500
$12,500 was the Net Income.
It was said that the Net Income was 5% of sales so using algebra we have,
12,500= 0.05x
x = 12,500/0.05
= $250,000
With sales of $250,000 we can calculate the Turnover as,
Asset Turnover = Sales / Assets( Investment)
= 250,000/100,000
= 2.5
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Answer:
The Turnover = 2.5
Explanation:
Step 1 : Find Net income
Return on Investment (ROA) = Net income/ Assets
12.5%=Net Income/$100,000
Net income = $100,000*12.5%
Net income= $12,500
Step 2 : Calculate Sales
Net income = Sales *5%
Therefore substitute known values
Sales = $12,500 *100/5
Sales = 250,000
Step 3 : Calculate Turnover ratio
Turnover = sales/ Assets
= 250,000/100,000
=2.5
