These are a few questions I am struggling with detailed answers too any help wou

Question

These are a few questions I am struggling with detailed answers too any help would be appreciated, please and a sincere thank you...

1. How can the ratio of net sales to total assets calculation as a calculation of effective management lead to poor decision making in the investment for a business? Discuss the strength and weakness in evaluating a manager's performance based on ratios and numbers only.

2. You are called in to a management meeting to discuss the advantages of the direct write off method vs. the percent of sales method. The owner of the company wants clarity on the position of the company when looking at accounts and also is very fearful of an IRS audit so he "doesn't want any trouble". Which method would you recommend and why? Be sure to explain all the advantages and disadvantages of each and fully develop the explanation of each.

3. Depreciation is often one of the most confusing concepts covered in any accounting course. How would you describe the use of depreciation and the methods available to utilize the expense and cost recovery? Explain the concepts first to another accountant, then to an owner that doesn't have a backround in formal business education.

4. Use chapter 11 as the foundation to discuss the growing issue of establishing and managing a pension fund. Why is it that we see more and more businesses going away from the offering of a pension to employees? Is this in the best interest of the employer or employee (or both or neither)?

Explanation / Answer

Asset turnover ratio is the ratio of a company's sales to its assets. It is an efficiency ratio which tells how successfully the company is using its assets to generate revenue.

There are a number of variants of the ratio like total asset turnover ratio, fixed asset turnover ratio and working capital turnover ratio. In all cases the numerator is the same i.e. net sales (both cash and credit) but denominator is average total assets, average fixed assets and average working capital respectively.

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