Question

Based on the following information for Montana​ Investments, Inc., compute the rate of return on total assets.​ (Round the percentage to two decimal​ places.)

Total​ Assets, December​ 31, 2019 $194,000
Total​ Assets, December​ 31, 2018 $139,000

For Year Ended December​ 31, 2019:

Interest Expense $11,000
Net Income $26,000

Answer 1

Answer:rate of return on total assets=22.22%

Explanation: Return on total assets is a ratio that measures the earnings generated by a company before interest and taxes in ralation to its total net assets which can be calculated from amount of financial and operations income grom a company's financial year in comparison to the average of that company's total assets.

For Montana​ Investments, Inc. in December31, 2019, we have that

Net income= $26,000

Interest expense

= $11,000

Average total assets= $194,000+$139,000/2

Return on total assets

=

(Net Income + Interest Expense) / Average total assets =

{$26,000 + 11,000 ) / [($194,000 + $139,000 ) / 2] =

37,000/166500=0.2222

=22.22%