Asset Turnover Ratio Calculation in Freedom Corporation

Freedom Corporation reported beginning and ending total assets of $36,000 and $32,000, respectively. Its net sales for the year were $32,300. The question asks for Freedom's asset turnover ratio, which is a financial metric used to measure a company's ability to generate revenue from its assets.

To calculate the asset turnover ratio, we can use the formula:

Asset Turnover Ratio = Net Sales ÷ Average Assets

First, we need to find the average assets by adding the beginning and ending total assets and dividing by 2:

Average Assets = ($36,000 + $32,000) ÷ 2 = $34,000

Next, we can plug the values into the formula to find the asset turnover ratio:

Asset Turnover Ratio = $32,300 ÷ $34,000 = 0.95

Therefore, Freedom Corporation's asset turnover ratio is 0.95, which means for every $1 of average assets, the company generates $0.95 of sales revenue.