Question

Profitability ratio: Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's return on assets (ROA)?

Answer 1

To calculate Juventus Corp's Return on Assets (ROA), we first determine the Net Income by multiplying their Net Sales ($7,212,465) with their Net Profit Margin (18%), resulting in a Net Income of $1,298,243.7. Then, we divide this Net Income by the Total Assets ($4,744,288) and multiply by 100 to get an ROA of 27.36%.

Step-by-step explanation:

The question is asking us to calculate the Return on Assets (ROA) for Juventus Corp. The ROA ratio provides insight into how effectively a company uses its assets to generate net income. To find the ROA, we need to use the following formula:

ROA = (Net Income / Total Assets) × 100

First, we calculate the Net Income by using the Net Profit Margin, which is expressed as a percentage of sales. The formula for this step is:

Net Income = Net Sales × Net Profit Margin

Given net sales of $7,212,465 and a net profit margin of 18%, we calculate Net Income as:

Net Income = $7,212,465 × 0.18 = $1,298,243.7

Now, we use the Net Income and Total Assets value to calculate ROA:

ROA = ($1,298,243.7 / $4,744,288) × 100

ROA = 27.36% (rounded to two decimal places)

Hence, Juventus Corp has a Return on Assets of 27.36%.