Financial statement data for years ending December 31, 2019 and 2018, for Latchkey Company follow:
2019 | 2018
Sales $1,734,000 | $1,645,000
Total assets:
Beginning of year 480,000 | 460,000
End of year 540,000 | 480,000
a. Determine the asset turnover for 2019 and 2018.
b. Does the change in the asset turnover from 2018 to 2019 indicate a favorable or an unfavorable trend?
Answer:
a.2019 2018 Asset turnover3.4* 3.5** * $1,734,000 ÷ [($480,000 + $540,000) ÷ 2] ** $1,645,000 ÷ [($460,000 + $480,000) ÷ 2] b. The decrease from 3.5 to 3.4 indicates an unfavorable change in using assets to generate sales.