Western Gas & Electric Co. (WG&E) had sales of $1,720,000 last year on fixed assets of...

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Finance

Western Gas & Electric Co. (WG&E) had sales of$1,720,000 last year on fixed assets of $380,000. Given thatWG&E’s fixed assets were being used at only 95% of capacity,then the firm’s fixed asset turnover ratio was _ .
How much sales could Western Gas & Electric Co. (WG&E)have supported with its current level of fixed assets?
$1,629,473
$1,810,526
$2,172,631
$1,448,421
When you consider that WG&E’s fixed assets were beingunderused, what should be the firm’s target fixed assets to salesratio?
18.89%
16.79%
20.99%
25.19%
Suppose WG&E is forecasting sales growth of 18% for thisyear. If existing and new fixed assets are used at 100% capacity,the firm’s expected fixed-assets turnover ratio for this year is_?

Answer & Explanation Solved by verified expert

3.7 Ratings (669 Votes)

a)Asset turnover ratio =sales /Asset

= 1720000/380000

= 4.5263 (rounded to 4.53 )

b)correct option is "B"

Sales required if operated at 100% capacity = 1720000* 100/95

= $ 1810526

c)correct option is "C"- 20.99%

Target fixed asset to sales ratio = 380000/1810526

= 20.99%

d)Increased sales = 1720000 (1+.18) = 2029600

Fixed asset required to support this sales : required sales if operated at 100% capacity * increased sales

= (380000/1810526) * 2029600

= .20988*2029600

= 425972.45

Fixed-assets turnover ratio = 2029600/425972.45

= 4.76 Rounded

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Western Gas & Electric Co. (WG&E) had sales of$1,720,000 last year on fixed assets of $380,000. Given thatWG&E’s fixed assets were being used at only 95% of capacity,then the firm’s fixed asset turnover ratio was ___ .How much sales could Western Gas & Electric Co. (WG&E)have supported with its current level of fixed assets?$1,629,473$1,810,526$2,172,631$1,448,421When you consider that WG&E’s fixed assets were beingunderused, what should be the firm’s target fixed assets to salesratio?18.89%16.79%20.99%25.19%Suppose WG&E is forecasting sales growth of 18% for thisyear. If existing and new fixed assets are used at 100% capacity,the firm’s expected fixed-assets turnover ratio for this year is___?

Western Gas & Electric Co. (WG&E) had sales of $1,720,000 last year on fixed assets of...

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Finance

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