Relationships among Return on Assets, Return on Sales, and Asset Turnover A company’s return on assets is a function of its ability to turn over its investment (asset turnover) and earn a profi t on each dollar of sales (return on sales). For each of the following independent cases, determine the missing amounts. (Note: Assume in each case that the company has no interest expense; that is, net income is used as the defi nition of income in all calculations.)

Case 1 Net income $ 10,000 Net sales $ 80,000 Average total assets $ 60,000 Return on assets ?

Case 2 Net income $ 25,000 Average total assets $ 250,000 Return on sales 2%

Net sales ?

Case 3 Average total assets $ 80,000 Asset turnover 1.5 times Return on sales 6%

Return on assets ?

Case 4 Return on assets 10%

Net sales $ 50,000 Asset turnover 1.25 times Net income ?

Case 5 Return on assets 15%

Net income $ 20,000 Return on sales 5%

Average total assets ?

AppendixLO1