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A fire destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You found the return on equity to equal 13.8 percent. Sales were $979,000, the total debt ratio was .42, and total debt was $548,000. What is the return on assets?

Respuesta :

Answer:

8%

Explanation:

The formula to compute the return on assets is shown below:

Return on assets = Net income ÷ Total assets

We know that

Total debt ratio = Total debt ÷ Total assets

0.42 = $548,000  ÷ Total assets

So, the total assets is

= $1,304,762

And, the accounting equation is

Total assets = Total liabilities + total stockholder equity

$1,304,762 = $548,000 + total stockholder equity

So, the  total stockholder equity is

= $1,304,762 - $548,000

= $756,762

Now

Return on Equity = Net income ÷ Equity

13.8% = Net income ÷ $756,762

So, the net income is $104,433

So, the return on assets equal to

= $104,433 ÷ $1,304,762

= 8%