Question

FastForward has net income of $19,090 and assets at the beginning of the year of $209,000. Its assets at the end of the year total $264,000. Compute its return on assets.

Answer 1

Given:

Net income = $19,090

Assets at the beginning of the year = $209,000.

Assets at the end of the year total = $264,000.

To find:

The return on assets.

Solution:

Formula used:

$\text{Return of assets}=\dfrac{\text{Net income}}{\text{Average of assets at the beginning and at the end}}$

Using the above formula, we get

$\text{Return of assets}=\dfrac{19090}{\dfrac{20900+264000}{2}}$

$\text{Return of assets}=\dfrac{19090}{\dfrac{473000}{2}}$

$\text{Return of assets}=\dfrac{19090}{236500}$

$\text{Return of assets}\approx 0.0807$

The percentage form of 0.0807 is 8.07%.

Therefore, the return on assets is 8.07%.