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9 April, 09:02

Goshen Industrial Sales has sales of $487,600, total equity of $367,700, a profit margin of 5.1 percent, and a debt-equity ratio of. 34. What is the return on assets?5.89 percent5.05 percent6.76 percent8.80 percent7.33 percent

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  1. 9 April, 09:21
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    The return on assets: 5.05 percent

    Explanation:

    Return on assets (ROA) = (Net Income / Total Assets) x100%

    Profit margin = Net income / Revenue (Sales)

    => Net income = Profit margin x Sales = 5.1% x $487,600 = $24,867.6

    Debt-equity ratio = Total Debt / Total Equity

    => Total Debt = Debt-equity ratio x Total Equity = 0.34 x $367,700 = $125,018

    Following accounting balance:

    Total Assets = Total Debt + Total Equity

    = $125,018 + $367,700 = $492,718

    Regarding the fomula of calculating ROA,

    ROA = ($24,867.6/$492,718) x 100% = 5.05%
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