Question

Вопрос 3 Moogle, Inc. is in the same business as Google, Inc., but has recently retired all its debt to become an all-equity firm. Its return on equity has dropped from 12.00% to 10.75% as a result of this. Google, Inc. continues to have debt in its capital structure, and its debt-to-equity ratio is 30.00%. What is the percentage return on assets of Google, Inc.? (Allow two decimals in the percentage but do not enter the % sign.)

Answer 1

Return on asset is 18.46 percent

Explanation:

Given information's are

Return on equity of Google inc., = 12.00% ( google inc does not change it's capital structure so return remains at  12%)

debt-to-equity ratio =  30.00 percent

Percentage return on assets of Google, Inc

Return on asset = Net income ÷ average total assets    

debt-to-equity ratio = Total liabilities ÷ stake holder's equity

here no amount is given for any account let us make an assumption as follows.,debt-to-equity ratio =  30.00 percent

The stack holder's equity  is $100 ( 30 ÷ 100 = 0.30 or 30 percent)

$The stack holder's equity is 100 ( 30 ÷ 100 = 0.30 or 30 percent)$

Total Assets considers both Equity and Debt      

so the Average assets = (debt + equity)÷ 2  

Average assets = ($30 + $100 ) ÷ 2 = $65

$Average assets = ( 30 + 100 ) ÷ 2 = 65$

Net income is the return attributed to the equity holders here.,

$100 be the share holders equity get from debt-equity ratio

Return on equity = 0.12 = Net income ÷ share holders fund

Net income = 12 percent = $100 × 12÷100 = $12

$Net income = 12 percent = 100 × 12÷100 = 12$

Return on asset = Net income ÷ average total assets

Return on asset  = 12÷ 65 = 0.1846 or 18.46 percent

$Return on asset = 12÷ 65 = 0.1846 or 18.46 percent$