Question

Sha Q-1 If you know the following Items from Balance sheet and Income statements at 31-Dec- 2019 Items Amount Cash 200,000 1,000,000 Inventory Account Receivables Sales 1,800,000 3,000,000 1,000,000 Account Payables Total equity Net income 2,000,000 100,000 The required: Calculate the following ratios: (The formula, your calculation steps, final answer are required)

please be quickly

Answer 1

Answering first four part as per Chegg's guidelines:

1.Calculation of return on Assets

ROA=Net Income/Total Assets

=100,000/(200,000+1000,000+1800,000)

=0.03

2.Calculation of Return on equity(ROE)

ROE=Net Income/Total Equity

=100,000/2000,000

=0.05

3.Higher the ROA,efficiently the company utilised its assets.Since ROA of current year is less than the ROA of 2018,hence ROA of 2018 is better.

4.ROE implies the earning ability of company against its shareholders investment.Higher the ROE,higher will be profitability.Since the ROE of 2019 is less than of 2018,hence ROE of 2018 is better.