Question

Omni Technology Holding Company has the following three affiliates:

	Software	Personal Computers	Foreign Operations
Sales	\(40,200,000	\)60,080,000	$100,680,000
Net Income (after tax)	2,086,000	2,880,000	8,510,000
Assets	5,820,000	25,790,000	60,630,000
Stockholder’s equity	4,090,000	10,170,000	50,950,000

c. Which affiliate has the highest total asset turnover?

Short answer

The total asset turnover ratio of the software (i.e. 6.91) is the highest.

Step-by-step solution

Total asset turnover of Software

$\begin{array}{rcl}\mathrm{Total}\mathrm{asset}\mathrm{turnover}& =& \frac{\mathrm{Sales}}{\mathrm{Assets}}\\ & =& \frac{\$40,200,000}{\$5,820,000}\\ & =& 6.91\end{array}$

Total asset turnover of Personal computers

$\begin{array}{rcl}\mathrm{Total}\mathrm{asset}\mathrm{turnover}& =& \frac{\mathrm{Sales}}{\mathrm{Assets}}\\ & =& \frac{\$60,080,000}{\$25,790,000}\\ & =& 2.33\end{array}$

Total assets turnover of Foreign operations

$\begin{array}{rcl}\mathrm{Total}\mathrm{asset}\mathrm{turnover}& =& \frac{\mathrm{Sales}}{\mathrm{Assets}}\\ & =& \frac{\$100,680,000}{\$60,630,000}\\ & =& 1.66\end{array}$