Question

Flingers Inc. reveals the following information in their annual report for FY 2004. Earnings and Expenses Sales $10,000,000 Cost of goods sold $5,000,000 Pre-tax earnings $500,000 Merchandise inventory $80,000 Total assets $2,000,000 What is Flingers' return on assets?

Answer 1

Answer:

25%

Explanation:

Given: Sales= $10,000,000

           Cost of goods sold= $5000000.

           Pre-tax earning= $500000.

           Merchandise inventory= $80000.

           Total assets= $2000000.

Now, computing the value of return on assets.

Formula; $Return\ on\ assets= \frac{Net\ income}{Average\ total\ assets} \times 100$

⇒ $Return\ on\ assets= \frac{500000}{2000000} \times 100$

⇒ $Return\ on\ assets= 0.25 \times 100$

∴ Return on assets= $25\%$

Hence, Flinger´s return on assets is 25%