Financial statement data for years ending December 31, 2019 and 2018, for Edison Company follow:
2019 | 2018
Sales $1,884,000 | $1,562,000
Total assets:
Beginning of year 770,000 | 650,000
End of year 800,000 | 770,000
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 turnover2.4* 2.2** * $1,884,000 ÷ [($770,000 + $800,000) ÷ 2] ** $1,562,000 ÷ [($650,000 + $770,000) ÷ 2] b. The increase from 2.2 to 2.4 indicates a favorable change in using assets to generate sales.