Question

You need the following information to answer the following 2 questions.

Assume that Dell Corp has total liabilities of $9,000, and total assets of $13,000.  It has sales of $5,000 and a profit margin of 11%,

18)  What is ROA (return on assets)?

a.    4.23%                              

b.   .423%                                                        

c.   38.46%                              

d.  .3846%

e.  .6923%

  

19)  What is net income?

A.  $100,000

B.   $550

C.   $4,000

D.   $4,450

E.   NONE OF THE ABOVE

Answer 1

Solution :

19)

The formula for calculating the profit margin is

Profit margin = Net Income / Sales

As per the information given in the question we have

Profit margin =11 % = 0.11 ; Sales = $ 5,000 ; Net Income = To find ;

Applying the above information in the formula we have

0.11 = Net Income / $ 5,000

0.11 * $ 5,000 = Net Income

Net Income = 0.11 * $ 5,000 = $ 550 ;

Thus the solution is Option B. $ 550

18)

The formula for calculating the Return on Assets is

Return on Assets = Net Income / Total Assets

As per the information given in the question we have

Net Income = $ 550   ; Total Assets = $ 13,000 ;

Applying the above information in the formula we have Return on Assets as

= $ 550 / $ 13,000

= 0.042308

= 4.2308 %

= 4.23 % ( when rounded off to two decimal places )

Thus the Return on Assets = 4.23 %

Thus the solution is Option a. 4.23 %