Lok Co. reports net sales of $4,970,000 for Year 2 and $8,532,000 for Year 3. End-of-year balances for total assets are Year 1, $1,684,000; Year 2, $1,780,000; and Year 3, $1,949,000. (1) Compute Lok's total asset turnover for Year 2 and Year 3.

Assets turnover ratio Year 2 =2.87 times

Assets turnover ratio for Year 3  = 4.58times

Explanation:

The total assets turnover is calculated as  = Net Sales / Average total assets

also,  

Average total assets = (Beginning assets + Ending Assets) / 2

Average total assets for Year 2 = ($1,684,000 +$1,780,000)/ 2 =$1,732,000

Average total assets for Year 3 = ($1,780,000 + $1,949,000 )/2 =$1,864,500

Assets turnover ratio Year 2 =$4,970,000 / $1,732,000 = 2.87 times

Assets turnover ratio for Year 3  = $8,532,000  / $1,864,500 = 4.58times

Total assets turnover - year 2 = 2.8695 times

Total assets turnover - year 3 = 4.5760 times

Explanation:

The total assets turnover is a measure used to assess the performance of businesses in terms of their efficiency to use their assets for generating sales. It calculates how much sale each dollar of asset is generating. The formula for total assets turnover is as follows,

Total assets turnover = Net Sales / Average total assets

Where,

Average total assets = (Total assets at start + Total assets at end) / 2

Total assets turnover - year 2 = 4970000 / [(1684000 + 1780000) / 2]

Total assets turnover - year 2 = 2.8695

Total assets turnover - year 3 = 8532000 / [(1780000 + 1949000) / 2]

Total assets turnover - year 3 = 4.5760

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