Question

Prime Electronic Sales has sales of $723,450, total equity of $490,000, a profit margin of 9.3 percent, and a debt-equity ratio of .42. What is the return on assets

Answer 1

Answer:

96.7%

Explanation:

Return on assets

= (Profit margin × sales)/[1 + debt equity ratio) × ( Total equity)]

Given that:

Profit margin = 93%

Sales = $723,450

Debt equity ratio = 42%

Total equity = $490,000

Then, Return on assets

= (0.93 × 723,450)/[(1 + 0.42) × $490,000]

= (672,809)/(1.42) × $490,000

= 672,809/695,800

= 0.9669

= 96.7%