Question

Return on total assets A company reports the following income statement and balance sheet information for the current year $410,000 Net income 90,000 Interest expense 5,000,000 Average total assets Determine the return on total assets. (Round percentages to one decimal place.)

Answer 1

1. Formula for return on total assets is:

Return on total assets = Net income / Average total assets

Putting the values in the above formula, we get,

Return on total assets = $410000 / $5000000 * 100

Return on total assets = 8.2%

2. (a) Formula of fixed assets to long term liabilities ratio is:

Fixed assets to long term liabilities = Fixed assets / Long term liabilities

Putting the values in the above formula, we get,

Fixed assets to long term liabilities ratio = $860000 / $200000 =  4.3

(b) Formula of liabilities to stockholder's equity is:

Liabilities to stockholder's equity = Total liabilities / Stockholder's equity

Putting the values in the above formula, we get,

Liabilities to stockholder's equity ratio = $600000 / $250000 = 2.4