Question

Atlas Company provided the following information for last year: Operating income $ 92,000 Sales 235,000 Beginning operating assets 410,000 Ending operating assets 440,000 Which of the following is Atlas's return on investment (ROI) for last year? (Note: Round answer to two decimal places.) a. 0.41 b. 0.50 c. 0.32 d. 0.22 e. 0.15

Answer 1

Answer: 0.22

Explanation: Return on total assets is calculated by dividing net income or operating income from average total assets. It is a profitability ratio which is used by analysts to evaluate the ability of the firm to generate revenue from the given level of assets it have.

`=\:(operating\:income)/(Average\:total\:assets)`

where,

`Average\:total\:assets=(410,000+\:440,000)/(2)`

= $425,000

Now,putting the values into equation :-

`=\:(92,000)/(425,000)`

= 0.22