Question 6.7: Ratio of Net Sales to Assets The following financial stateme......

Financial Accounting [EXP-43430]

Ratio of Net Sales to Assets

The following financial statement data for the years ending December 31, 2012 and 2011, for Gilbert Company are shown below.

a. Determine the ratio of net sales to assets for 2012 and 2011.

b. Does the change in the current ratio from 2011 to 2012 indicate a favorable or an unfavorable trend?

		2012	2011
Net sales		$1,305,000	$962,500
Total assets:
Beginning of year		840,000	700,000
End of year		900,000	840,000

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b. The change from 1.25 to 1.50 indicates a favorable trend in using assets to generate sales.

a.

	2012	2011
Ratio of net sales to assets	1.50	1.25
	$1,305,000/[($840,000 + $900,000)/2]	$962,500/[($840,000 + $700,000)/2]

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