Question

apter 3 Saved A fire has destroyed a large percentage of the financial records of the Inferno Company. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 16.7 percent. Sales were $1,795,000, the total debt ratio was 31, and total debt was $660.000 What is the return on assets (ROA)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) 3:44 Return on assets

Answer 1

Total debt ratio = Total debt / Total assets

0.31 = $660,000 / Total assets

Total assets = $2,129,032.258

Total assets = Total debt + Equity

$2,129,032.258 = $660,000 + Equity

Equity = $1,469,032.258

ROE = Net income / Equity

0.1670 = Net income / $1,469,032.258

Net income = $245,328.387

ROA = Net income / Total assets

ROA = $245,328.387 / $2,129,032.258

ROA = 0.1152 or 11.52%