Question

Given the following information for Blue Bell Company for last year:

Net sales (all on account)		$5,200,000
Cost of goods sold		2,080,000
Interest expense		240,000
Income tax expense		280,000
Net income		420,000
Income tax rate		40%
Total assets:
	January 1	$1,800,000
	December 31	2,400,000
Shareholders' equity (all common):
	January 1	1,500,000
	December 31	1,600,000
Current assets, December 31		700,000
Quick assets, December 31		400,000
Current liabilities, December 31		300,000
Net accounts receivable:
	January 1	200,000
	December 31	180,000
Inventory:
	January 1	210,000
	December 31	250,000

Refer to Exhibit 4-1. Blue Bell's return on assets for the year was

17.5%

31.4%

20.0%

26.9%

Answer 1

The return on assets for Blue bell = Net Income / Total assets

Return on Assets = $420,000/ $2,400,000 = 17.5 %

Total Assets = $2,400,000

Net Income = $420,000

ROA is calculated by dividing a company’s net income by total assets.

Net income (NI), also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses.

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