The following data were included in a recent Papaya Inc. annual report (in milli

Question

The following data were included in a recent Papaya Inc. annual report (in millions):

Compute Papaya's fixed asset turnover ratio for 2011, 2012, and 2013. (Do not round intermediate calculations. Round your answers to 1 decimal place.)

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During 2013, Microsoft reported a fixed asset turnover ratio of 9.2. Was Papaya's turnover better or worse than Microsoft's in that year?

2010 2011 2012 2013   Net revenue $72,225 $120,119 $169,500 $169,910   Net property, plant, and equipment 4,860 8,380 15,520 14,300

Explanation / Answer

1 Formula: Fixed asset turnover ratio = Net sales Average fixed assets 2011 2012 2013 Net Sales 120119 169500 169910 Opening Assets(a) 4860 8380 15520 closing assets(b) 8380 15520 14300 avg assets(a+b)/2 6620 11950 14910 Fixed asset turnover ratio 18.1 14.2 11.4 2 Fixed assets turnover ratio (also known as sales to fixed assets ratio) is a commonly used activity ratio that measures the efficiency with which a company uses its fixed assets to generate its sales revenue high fixed assets turnover ratio indicates better utilization of fixed assets and a low ratio means inefficient or under-utilization of fixed assets since in 2013 microsoft fixed asset turnover ratio (9.2) is less than that of papaya's. thus papayas turnover is better

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