Total Income of the Zee Ltd 8,00,000, other income is 45000 and total of the assets is 15,00,000, current liability is 250,000, calculate asset turnover ratio.
Question
Total Income of the Zee Ltd: 8,00,000
Other Income: 45,000
Total Assets: 15,00,000
Current Liability: 2,50,000
Calculate asset turnover ratio.
Solution
The asset turnover ratio is a measure of a company's ability to generate sales from its assets. It is calculated as follows:
Asset Turnover Ratio = Total Sales / Total Assets
In the case of Zee Ltd, the total sales is the sum of the total income and other income. So,
Total Sales = Total Income + Other Income Total Sales = 8,00,000 + 45,000 Total Sales = 8,45,000
The total assets of Zee Ltd is given as 15,00,000.
So, the asset turnover ratio is:
Asset Turnover Ratio = Total Sales / Total Assets Asset Turnover Ratio = 8,45,000 / 15,00,000 Asset Turnover Ratio = 0.563
So, the asset turnover ratio of Zee Ltd is 0.563. This means that for every rupee of assets, Zee Ltd generates 0.563 rupees of sales.
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