Financial Accounting and Reporting-CPA Practice Exam

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Prepare for the Financial Accounting and Reporting-CPA Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

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What are Marcel, Inc's total asset turnover and inventory turnover amounts based on given data?

7.00 times total asset turnover; 2.00 times inventory turnover.
2.00 times total asset turnover; 7.00 times inventory turnover.
0.50 times total asset turnover; 0.33 times inventory turnover.
10.00 times total asset turnover; 0.60 times inventory turnover.

The correct answer is: 2.00 times total asset turnover; 7.00 times inventory turnover.

Total asset turnover is calculated by dividing total sales (or revenue) by average total assets. This ratio indicates how efficiently a company uses its assets to generate sales. A total asset turnover of 2.00 times indicates that for every dollar of assets, Marcel, Inc generates two dollars of sales, showcasing effective asset management. Inventory turnover is computed by dividing the cost of goods sold (COGS) by average inventory. It measures how many times a company sells and replaces its inventory over a period. An inventory turnover of 7.00 times suggests that Marcel, Inc successfully sells out and replenishes its inventory seven times during the measured period, which reflects strong sales or efficient inventory management. Both ratios together illustrate Marcel, Inc's operational efficiency in utilizing assets and managing inventory, reinforcing the company's effectiveness in leveraging its resources to generate revenue.