Question

An appliance store has total assets of $2,800,000, accounts receivable of $900,000, accounts payable of $700,000, inventory valued at $1,500,000, and total liabilities of $2,500,000. in 1999, its net sales were $2,100,000, and its net profit equalled $42,000. calculate the store's return on assets.

a. 1.5 percent
b. 2.8 percent
c. 7.5 percent
d. 71.4 percent

Answer 1

The store's return on assets is 1.5 percent.

Step-by-step explanation:

To calculate the store's return on assets, we need to divide its net profit by its total assets and multiply by 100 to express it as a percentage.

Net profit = $42,000

Total assets = $2,800,000

Return on Assets = (Net Profit / Total Assets) * 100

Return on Assets = ($42,000 / $2,800,000) * 100 = 1.5%

Therefore, the store's return on assets is 1.5 percent (option a).