Question

A fire has destroyed a large percentage of the financial records of the Inferno Company. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 18.1 percent. Sales were $1,830,000, the total debt ratio was .31, and total debt was $667,000.

What is the return on assets (ROA)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

-Total Debt ratio = Total Debt/Total Assets

0.31 = $667,000/Total Assets

Total Assets = $2,151,612.90

- Total Equity = Total Assets - Total Debt

Total Equity = $2151,612.90 - $667,000

Total Equity = $1484,612.90

- Return on Equity(ROE) = Net Income/Total Equity

0.181 = Net income/$1484,612.90

Net income = $268,714.93

So, Return on Assets(ROA) = Net Income/Total Assets

ROA = $268,714.93/$2,151,612.90

ROA = 12.49%

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