Question

What are the annual sales for a firm with $400,000 in debt, a total debt ratio of 0.4, and an asset turnover of 3

Answer 1

Answer:

$3,000,000

Explanation:

The first step is to calculate the assets

= debt / Total debt ratio

= 400,000/0.4

= 1,000,000

Therefore the annual sales for the firm can be calculated as follows

= 3 × 1,000,000

= $3,000,000