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)
Total Assets considers both Equity and Debt
so the Average assets = (debt + equity)÷ 2
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
Return on asset = Net income ÷ average total assets
Return on asset = 12÷ 65 = 0.1846 or 18.46 percent
