Question

Flitter reported net income of $17,500 for the past year company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets At the beginning of the year the A) 7.0% B) 23.3% C) 8.8% E) 5.8%

Answer 1

Answer:

A) 7.0%

Explanation:

Average total Assets = (Opening Assets + Closing Assets) / 2

Average total Assets = (200,000 + 300,000) / 2

Average total Assets = $250,000

Formula for return on assets:

Return on assets = Net Income /Average total Assets

Return on assets = 17,500 / 250,000

Return on assets = 0.07

Return on assets = 7%

Correct option is A) 7.0%