Question

Dawson Electronic Services had revenues of $88,000 and expenses of $54,000 for the year. Its assets at the beginning of the year were $404,000. At the end of the year assets were worth $454,000. Calculate its return on assets.

Answer 1

0.07925 or 7.925%

Step-by-step explanation:

Given that,

Revenues = $88,000

Expenses = $54,000

Assets at the beginning of the year = $404,000

End of the year assets = $454,000

Net income:

= Revenues - Expenses

= $88,000 - $54,000

= $34,000

Average total assets:

= (Assets at the beginning + End of the year assets) ÷ 2

= ($404,000 + $454,000) ÷ 2

= $429,000

Return on assets:

= Net income ÷ Average total assets

= $34,000 ÷ $429,000

= 0.07925 or 7.925%