Question

The following information pertains to Marigold Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.Assets Cash and short-term investments $ 40,000Accounts receivable (net) 30,000Inventory 25,000Property, plant and equipment 215,000Total Assets $310,000Liabilities and Stockholders' Equity Current liabilities 60,000Long-term liabilities 95,000Stockholders' equity-common 155,000Total Liabilities and stockholders' equity $310,000Income Statement Sales $ 90,000Cost of goods sold 45,000Gross margin 45,000Operating expenses 20,000Net income $ 25,000Number of shares of common stock 6,000000Market price of common stock $40Dividends per share 1.00Cash provided by operations $40,000What is the rate earned on total assets for this company?A. 8.1%B. 6.8%C. 10.5%D. 16.1%

Answer 1

Answer:

Marigold Company

The rate earned on total assets for Marigold = Net Income/Total Assets * 100

=  $ 25,000/$310,000 * 100

= 8.06%

Explanation:

a) Data:

Assets

Cash and short-term investments              $ 40,000

Accounts receivable (net)                               30,000

Inventory                                                         25,000

Property, plant and equipment                    215,000

Total Assets                                                $310,000

Liabilities and Stockholders' Equity

Current liabilities                                            60,000

Long-term liabilities                                       95,000

Stockholders' equity-common                    155,000

Total Liabilities and stockholders' equity $310,000

Income Statement

Sales                          $ 90,000

Cost of goods sold      45,000

Gross margin               45,000

Operating expenses   20,000

Net income              $ 25,000

Number of shares of common stock 6,000000

Market price of common stock $40

Dividends per share 1.00

Cash provided by operations $40,000

b) Marigold's Return on assets (ROA) indicates how profitable it is relative to its total assets.  Its ROA gives a manager, investor, or analyst an idea as to how efficient Marigold's management is at using the company's assets to generate earnings.  As a percentage, Marigold's Return on assets is 8.06%.