Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 21

Review the chapter's opening feature involving Deb Carey and her company, New Glarus Brewing Co.. Assume that the company currently has net sales of $8,000,000, and that it is planning an expansion that will increase net sales by $4,000,000. To accomplish this expansion, New Glarus Brewing Co. must increase its average total assets from $2,500,000 to $3,000,000.
Required
1. Compute the company's total asset turnover under ( a ) current conditions and ( b ) proposed conditions.
2. Evaluate and comment on the merits of the proposal given your analysis in part 1. Identify any concerns you would express about the proposal.
REFERENCE: New Glarus Brewing Co..