2014 2013
Net sales $1,884,000 $1,562,000
Total assets:
Beginning of year 770,000 650,000
End of year 800,000 770,000
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 2.4* 2.2**
* $1,884,000 ÷ [($770,000 + $800,000) ÷ 2]
** $1,562,000 ÷ [($650,000 + $770,000) ÷ 2]
b. The change from 2.2 to 2.4 indicates a favorable trend in using assets to
generate sales.