5 value: 214 points E9-14 Computing and Interpreting the Fixed Asset Turnover Ra

Question

5 value: 214 points E9-14 Computing and Interpreting the Fixed Asset Turnover Ratio from a Financial Analysts Perspective [LO 9-7] The following data were included in a recent Papaya Inc. annual report (in millions) 2012 2010 2011 $73,225 $121,449 $171,500 $172,910 2013 Net revenue Net property, plant, and equipment 4,8 70 8,480 15,530 14,600 Required 1. Compute Papaya's fixed asset turnover ratio for 2011, 2012, and 2013. (Do not round intermediate calculations. Round your answers to 1 decimal place.) Fixed Asset Turnover Ratio ear 2011 2012 2013 2. During 2013, Microsoft reported a fixed asset turnover ratio of 9.3. Was Papaya's turnover better or worse than Microsoft's in that year? Better Worse

Explanation / Answer

1.The formula for computing Fixed assets turnover is :- Net sales/Fixed assets-Accumulated Depriciation.

For 2011 it will be : 121,449/8480 = 14.32 times.

For 2012 it will be : 171,500/15530=11.04 times.

For 2013 it will be : 172,910/1460=11.84 times.

2.Papayas fixed assets turnover was better when compared to Microsoft because , Papaya had a turnover of 11.84 times compared with 9.3 times of Microsoft. which depicts that the performance of papaya was better.

Note:- I was extremely sorry for the answer provided earlier which was wrong. Please forgive me for the inconvinience caused. Thank you.

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