TA04

In this project, we want to evaluate fixed assets utilization of both A Retail and B Retail.

First, both companies’ asset-turnover ratios will be compared to find out how effectively both companies use their assets to earn sales revenue.

Second, we want to check the relative age of their fixed assets. This might explain whether a relatively old/new fixed asset is related with high/low fixed asset turnover rate. In general, relative age of fixed asset can be estimated as a ratio of accumulated depreciation divided by fixed asset. A low ratio means the assets have plenty of life left in them and should be able to be used for years to come. In addition, they could be more productive.

After your analysis, answer the following questions based upon what you find:

1. What is the fixed-asset turnover ratio for A Retail (a) in 2012 and (b) in 2021?
2. What is the fixed asset turnover ratio for B Retail (a) in 2012 and (b) in 2021?
3. Comparing the two companies’ fixed asset turnover ratios over the ten-year period, which company exhibits the more favorable fixed asset turnover?
4. Comparing the accumulated depreciation to fixed assets ratios over the ten-year period, is A retail’s ratio (a) increasing generally, (b) the same roughly, or (c) decreasing generally from year to year?
5. Comparing the accumulated depreciation to fixed assets ratios over the ten-year period, is B retail’s ratio (a) increasing generally, (b) the same roughly, or (c) decreasing generally from year to year?
6. Comparing the two companies’ accumulated depreciation to fixed assets ratios over the ten-year period, which company appears to maintain fixed assets with longer remaining useful lives?
7. Combining your answers for question 3 and question 6, can you say a company with longer remaining fixed assets’ lives has more favorable fixed asset turnover ratios? Can we interpret a low accumulated depreciation to fixed asset as more favorable than a high ratio? Based on your answer, “Yes” or “No,” provide your reasoning

1. To start this project, we will use Retail Stores Data If you don’t have the database, please download “Retail Stores Data.”
2. On “The Sheet 1” tab at the bottom of the canvas, Drag “Company” and “Year” to the Rows shelf.
   The calculated field variables are FATO (Fixed Asset Turnover) and AD to FA (Accumulated Depreciation to Fixed Asset) ratios.
   Their formulas are as follows:
   Fixed Asset Turnover = Net Sales / Average Fixed Assets
   AD to FA = – Less accumulated depreciation /(Building and Improvements + Computer hardware and software + Construction in progress + Fixture and Equipment)
   We may need to drag these variables to compute the two calculated field variables.
   Prepare charts to examine and to answer TA04 questions. You need not submit these charts.