Question

Calculate the return on assets for a gun shop that has total assets of $410,000, current assets of $74,000, total liabilities of $280,000, accounts receivable of $12,000, net sales of $64,000, and operating profit margin of $30,000.

Answer 1

7.3

Step-by-step explanation:

Return on assets ratio is a profitability ratio that indicates how efficient a company is in generating profits by use of its assets. The ratio is calculating by dividing net income by average total assets.

i.e., return on assets = Net income / Average total assets.

The ratio is expressed as a percentage. The ratio is multiplied by 100.

From the information given

Total asset = $410,000

Current assets = $74,000

Net sales $64,000

Operating profit = $30,000

Average total assets = opening asset + closing asset/2

In the case assets are $410,000

Net income is operating profit margin = $30,000

ROA = $30,000/$410,000 x 100

=0.073170 x 100

=7.31%