Question

Magic Flutes has total receivables of $4,000, which represent 20 days' sales. Total assets are $80,000. The firm's operating profit margin is 5.50%. Assume a 365-day year. a. What is the firm's sales-to-assets ratio? (Round your answer to 2 decimal places.) Sales-to-asset ratio b. What is the firm's return on assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Return on assets %

Answer 1

(1)

sales to assets ratio = sales/total assets

= $73000/$80000

= 0.91

where,

sales = $4000 x (365/20) = $73000

(2)

Return on assets = operating profit/total assets

= $4015/$80000

= 5.02%

where,

operating profit = $73000 x 5.50% = $4015