If a toy co. has sales of $539,000 and a profit margin of 5%, and a capital intensity ratio of 1.2. What is the asset turnover rate?
To find the asset turnover rate, we need to use the formula:
Asset Turnover = Sales / Average Total Assets
First, we need to calculate the average total assets. To do this, we need the capital intensity ratio.
Capital Intensity Ratio = Total Assets / Sales
Now, we can rearrange the formula to find the total assets:
Total Assets = Capital Intensity Ratio * Sales
Given that the capital intensity ratio is 1.2 and the sales are $539,000, we can calculate the total assets:
Total Assets = 1.2 * $539,000 = $646,800
Next, we can substitute the value of total assets into the asset turnover formula:
Asset Turnover = Sales / Average Total Assets
Asset Turnover = $539,000 / $646,800
Finally, we can calculate the asset turnover rate:
Asset Turnover = 0.8347
Therefore, the asset turnover rate for the toy company is approximately 0.8347.