Question

Flingers Inc. reveals the following information in their annual report for FY 2004. Earnings and Expenses Sales $10,000,000 Cost of goods sold $5,000,000 Pre-tax earnings $500,000 Merchandise inventory $80,000 Total assets $2,000,000 What is Flingers' return on assets?

Answer 1

25%

Step-by-step explanation:

Given: Sales= $10,000,000

Cost of goods sold= $5000000.

Pre-tax earning= $500000.

Merchandise inventory= $80000.

Total assets= $2000000.

Now, computing the value of return on assets.

Formula;
`Return\ on\ assets= (Net\ income)/(Average\ total\ assets) * 100`

⇒
`Return\ on\ assets= (500000)/(2000000) * 100`

⇒
`Return\ on\ assets= 0.25 * 100`

∴ Return on assets=
`25\%`

Hence, Flinger´s return on assets is 25%