CFA Level I · CFA Level I Exam · Financial Analysis Techniques
A company's sales are 2,400, cost of sales is 1,500, and total assets were 1,000 at the start and 1,400 at year end. Its total asset turnover is closest to:
Total asset turnover is sales divided by average total assets. Average assets are 1,200, so 2,400 divided by 1,200 equals 2.00. Using year-end assets instead of the average would give 1.71, which is incorrect.
- A1.07
- B1.71Correct
- C2.00
Explanation
Average total assets = (1,000 + 1,400)/2 = 1,200. Total asset turnover = sales / average assets = 2,400/1,200 = 2.00. Using cost of sales gives 1.25, and using year-end assets gives 1.71, so the key must be 2.00.
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