Question

What is the return on net operating assets (RNOA), to two decimal places, if the company...

What is the return on net operating assets (RNOA), to two decimal places, if the company has an asset turnover of 2.9 and a profit margin of 5%?

Homework Answers

Answer #1

ANSWER = 14.5%

return on net operating assets (RNOA) = (net profit /  total assets) *100

Here

asset turnover ratio = 2.9

asset turnover ratio = net sales / total assets

profit margin = 5%

profit margin = net profit / net sales

net profit / net sales =5% ------------------------------------- (1)

net sales / total assets = 2.9 -----------------------------------------(2)

i.e

net sales = total assets *  2.9 -------------------------------------(3)

Substituting(3) in equation (1)

net profit /  (total assets *  2.9) =5%

net profit /  total assets = (5% * 2.9 ) *100

= 14.5%

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