Question

Chou Co. has a net income of $47,000, assets at the beginning of the year are $254,000 and assets at the end of the year are $304,000. Compute its return on assets.

Answer 1

Answer:

Return on assets=28.54%

Explanation:

Return on asset is the average rate of return generated by the asset investment of a business. It is the net income earned as a proportion of  the average investment.

Return on assets = net income / Average assets× 100

Average asset value = (opening balance + closing balance of assets)/2

                                  =( 254,000 + 304,000)/2= 164700

Return on assets = 47,000/164,700 × 100 =28.54%

Return on assets=28.54%