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Math  /  Data & Statistics

Question\begin{tabular}{lll} & Amazon & Netflix \\ \hline Total revenues (sales) & $280,522\$ 280,522 & $20,156\$ 20,156 \\ Total assets: & & \\ Beginning of year & 162,648 & 25,974 \\ End of year & 225,248 & 33,976 \end{tabular} a. Which of these assets are used by Netflix, Inc. to generate revenue? a. DVD content library b. Distribution centers c. Streaming content library d. Manufacturing plant
1. aa and b
2. a and c
3. a and d
4. b and c b. Compute the asset turnover ratio for each company. Round to two decimal places. Amazon Netflix
Asset turnover ratio □\square □\square c. Which company generates sales from total assets more efficiently? \qquad

Studdy Solution

STEP 1

1. The asset turnover ratio is calculated as total revenues divided by average total assets.
2. Average total assets are calculated as the sum of the beginning and end of year total assets divided by 2.
3. The problem requires determining which assets Netflix uses to generate revenue based on the given options.

STEP 2

1. Identify the assets used by Netflix to generate revenue.
2. Calculate the asset turnover ratio for Amazon.
3. Calculate the asset turnover ratio for Netflix.
4. Compare the asset turnover ratios to determine which company generates sales more efficiently.

STEP 3

Identify the assets used by Netflix to generate revenue. Given the options: - a. DVD content library - b. Distribution centers - c. Streaming content library - d. Manufacturing plant
Netflix primarily uses its streaming content library and distribution centers to generate revenue. Therefore, the correct choice is:
4. b and c \text{4. b and c}

STEP 4

Calculate the average total assets for Amazon:
Average Total Assets for Amazon=162,648+225,2482=387,8962=193,948 \text{Average Total Assets for Amazon} = \frac{162,648 + 225,248}{2} = \frac{387,896}{2} = 193,948
Calculate the asset turnover ratio for Amazon:
Asset Turnover Ratio for Amazon=280,522193,948≈1.45 \text{Asset Turnover Ratio for Amazon} = \frac{280,522}{193,948} \approx 1.45

STEP 5

Calculate the average total assets for Netflix:
Average Total Assets for Netflix=25,974+33,9762=59,9502=29,975 \text{Average Total Assets for Netflix} = \frac{25,974 + 33,976}{2} = \frac{59,950}{2} = 29,975
Calculate the asset turnover ratio for Netflix:
Asset Turnover Ratio for Netflix=20,15629,975≈0.67 \text{Asset Turnover Ratio for Netflix} = \frac{20,156}{29,975} \approx 0.67

STEP 6

Compare the asset turnover ratios:
- Amazon's asset turnover ratio: 1.45 1.45 - Netflix's asset turnover ratio: 0.67 0.67
Amazon generates sales from total assets more efficiently than Netflix.
The asset turnover ratios are:
Amazon: 1.45 \text{Amazon: } 1.45 Netflix: 0.67 \text{Netflix: } 0.67
Amazon generates sales from total assets more efficiently.

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