Answer:
return on Assets 25%
Explanation:
Return on Asset is the ratio of net income ratio to total asset of the company. It measure the productivity and efficiency of all the assets used to generate this net income.
According to given data
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
As there is no tax rate is given, we will use the Pre-Tax Earnings for Return on assets ratio.
Return on Assets = Pre-Tax Earnings / Total Assets = $500,000 / 2,000,000
Return on Assets = 0.25 = 25%
Saving in purchasing will decrease the cost of gods sold and Increase the gross profit of the Company.
