2014 2013
Net sales $1,734,000 $1,645,000
Total assets:
Beginning of year 480,000 460,000
End of year 540,000 480,000
a. Determine the ratio of net sales to assets for 2014 and 2013.
b. Does the change in the ratio of net sales to assets from 2013 to 2014 indicate a favorable or an unfavorable trend?
Answer:
a. 2014 2013
Ratio of net sales to assets 3.4* 3.5**
* $1,734,000 ÷ [($480,000 + $540,000) ÷ 2]
** $1,645,000 ÷ [($460,000 + $480,000) ÷ 2]
b. The change from 3.5 to 3.4 indicates an unfavorable trend in using assets to
generate sales.