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Pendant Publishing reported the following results for its Textbook Division: |Sales |$4,200,000 ...

Question:

Pendant Publishing reported the following results for its Textbook Division:

Sales $4,200,000
Operating income $840,000
Total assets $1,500,000
Current liabilities $550,000

Pendant's target rate of return is 22% and the weighted average cost of capital is 15%. Its effective tax rate is 25%.

What is the Textbook Division's capital turnover?

5.0

7.6

2.8

1.8

Answer and Explanation:


Correct answer: The last before option) 2.8 times

Explanation:

Pendant Publishing reported that:

For textbook division:

  • Sales = $4,200,000
  • Total assets = $1,500,000

Formula:

Capital Turnover = Sales / Total assets

Textbook Division's Capital Turnover = $4,200,000 / $1,500,000

Textbook Division's Capital Turnover = 2.8 times


Learn more about this topic:

Efficiency Ratios: Types & Formula

from Accounting 101: Financial Accounting

Chapter 13 / Lesson 7
13K

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