Question

Return on Assets The following financial data is from Hi-Tech Instruments' financial statements (thousands of dollars,...

Return on Assets
The following financial data is from Hi-Tech Instruments' financial statements (thousands of dollars, except earnings per share.)

2016
Sales revenue $210,000
Cost of goods sold 125,000
Net income 9,300
Dividends 3,600
Earnings per share 4.65
Hi-Tech Instruments, Inc.
Balance Sheet

(Thousands of Dollars)

 Dec. 31, 2016 Dec. 31, 2015
Assets
Cash $19,800 $18,000
Accounts receivable (net) 46,000 41,000
Inventory 39,500 43,700
Total current assets 105,300 102,700
Plant assets (net) 52,600 50,500
Other assets 15,600 13,800
Total assets 173,500 $167,000
Liabilities and Stockholders' Equity
Notes payable-banks $6,000 $6,000
Accounts payable 22,500 18,700
Accrued liabilities 16,500 21,000
Total current liabilities 45,000 45,700
9% Bonds payable 41,500 40,000
Total liabilities 86,500 85,700
Common stock, $25 par value (2,000,000 shares) 50,000 50,000
Retained earnings 37,000 31,300
Total stockholders' equity 87,000 81,300
Total liabilities and stockholders' equity 173,500 $167,000
Industry Average Ratios for Competitors
Quick ratio 1.3
Current ratio 2.4
Accounts receivable turnover 5.9 times
Inventory turnover 3.5 times
Debt-to-equity ratio 0.73
Gross profit percentage 42.8 percent
Return on sales 4.5 percent
Return on assets 7.6 percent

Calculate the company's return on assets for 2016.

Round answer to one decimal place. (Ex.: 0.2345 = 23.5%)

Answer%

Compare the result to the industry average.

Hi-Tech Instruments' ratio is higher than the industry average.

Hi-Tech Instruments' ratio is lower than the industry average.

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Homework Answers

Answer #1

ANSWER

(All Fig are in Thousands of dollars)

Return on Assets = Net Income / Average Total Assets

Net Income = $ 9,300

Average Total Assets = (Opening Total Assets + Closing Total Assets) / 2

Opening Total Assets = $167,000

Closing Total Assets = $173,500

Average Total Assets = ($167,000 + $173,500) / 2

= $170,250

Return on Assets = $9,300 / $170,250

= 5.46 %

In comparision to the industry average Hi-Tech Instruments' ratio is lower than the industry average.

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