Question
Calculate the Return on Assets (ROA) for the following company results: 2018 Net Sales $8,386,000 Net Income* 924,770 Average Total Assets 6,555,000 *Assume there are
Calculate the Return on Assets (ROA) for the following company results: 2018 Net Sales $8,386,000 Net Income* 924,770 Average Total Assets 6,555,000 *Assume there are no non-recurring items or non-controlling interests
6. Net Profit Margin __________________ / ____________ = _____________
7. Total Asset Turnover __________________ / ____________ = _____________
8. Return on Assets (DuPont) __________________ X ____________ = _____________
9. Compare & Interpret:
a) To answer this question: If the company expects a ROA of 13%, has the company met its target based on the results above? Complete the following statement: The actual return on assets of _____ is _____________ than the expected return of ______%
b) Explain what the results above indicate about managements performance: Assume Net Profit Margin was expected to be 10% and Total Asset Turnover to be 1.2. i. Net Profit Margin: ii. Total Asset Turnover: _____
10. In the formula for return on investment, interest expense is multiplied by (1 x tax rate), then added to net income. Why is this adjustment made?
a. Interest is not tax deductible
b. Net income is after tax; the numerator must be adjusted to represent all long-term providers of capital
c. Debt is excluded from the denominator to represent common shareholders
d. Dividends are not tax deductible
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