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%
