Question

Return on assets ratio and asset turnover ratio campo systems reported the following financial data (in millions) in its annual report: previous year current year net income $13,052 $11,134 net sales 89,540 86,117 total assets 98,700 118,128 if the company's total assets are $105,676 at the beginning of the previous year, calculate the company’s: (a) return on assets (round answers to one decimal place - ex: 10.7%) (b) asset turnover for both years (round answers to two decimal places)

Answer 1

To calculate the return on assets (ROA) and asset turnover ratios, you apply their respective formulas to the provided financial data.

Step-by-step explanation:

Calculating Return on Assets (ROA) and Asset Turnover Ratios

To determine the return on assets (ROA), we use the formula ROA = (Net Income / Total Assets) × 100%. For the asset turnover ratio, the formula is Asset Turnover = Net Sales / Average Total Assets.

Using the provided data:

1. Previous Year ROA: ($13,052 million / $105,676 million) × 100% = 12.4%
2. Current Year ROA: ($11,134 million / $118,128 million) × 100% = 9.4%
3. Previous Year Asset Turnover: $89,540 million / (($105,676 million + $98,700 million) / 2) = 0.87 times
4. Current Year Asset Turnover: $86,117 million / (($98,700 million + $118,128 million) / 2) = 0.76 times

These calculations show the company's efficiency in generating profit from its assets and how effectively it uses its assets to generate sales.