Question

Goshen Industrial Sales has sales of $487,600, total equity of $367,700, a profit margin of 5.1 percent. ad debt-equity ratio of .34. What is the return on assets?

A. 5.89 percent
B. 5.05 percent
C. 6.76 percent
D. 8.80 percent
E. 7.33 percent a te of 5 87 percen

Answer 1

correct option is B. 5.05 percent

Step-by-step explanation:

given data

sales = $487,600

total equity = $367,700

profit margin = 5.1 percent

debt-equity ratio = .34

solution

we get ere return on assets for that first we get here Net Income that is express as

Net Income = Profit Margin × Sales ..................1

put here value

Net Income 5.1% × $487600

Net Income =$24867.60

so debt will be as

Debt = Debt Equity Ratio × Total Equity .......................2

Debt = 0.34 × $367700

Debt = $125018

and Total Assets will be

Total Assets =Debt + Equity ..........................3

Total Assets = $125018 + $367700

Total Assets = $492718

so here Return on Assets will be as

Return on Assets =
`(net\ income)/(total\ assets)` .......................4

Return on Assets =
`(24867.60)/(492718)`

Return on Assets = 5.05%

so correct option is B. 5.05 percent