Question

​

Answer the following questions according to Table​ 4-1.

Table​ 4-1

​ Zcijekoulo, Inc.

Balance Sheet

​Assets:
Cash and marketable securities		​$600,000
Accounts receivable		​900,000
Inventories		​1,500,000
Prepaid expenses		​75,000
Total current assets		​$3,075,000
Fixed assets	​8,000,000
​Less: accum. depr.	​(2,075,000)
Net fixed assets		​$5,925,000
Total assets		​$9,000,000
​Liabilities:
Accounts payable		​$800,000
Notes payable	​700,000
Accrued taxes		​50,000
Total current liabilities		​$1,550,000
Longminus−term debt		​2,500,000
​Owner's equity​ (1 million shares of common stock​ outstanding)		​4,950,000
Total liabilities and​ owner's equity		​$9,000,000
Net sales​ (all credit)		​$10,000,000
​Less: Cost of goods sold		​(3,000,000)
Selling and administrative expense		​(2,000,000)
Depreciation expense		​(250,000)
Interest expense		​(200,000)
Earnings before taxes		​4,550,000
Income taxes		​(1,820,000)
Net income		​$2,730,000

Based on the information in the above​ tale, the Operating ROA is

Answer 1

Operating ROA = EBIT / Toal assets

EBIT calculation

Particulars	Amount
Sales	$       1,00,00,000
Less : Cost of goods sold	$          30,00,000
	$          70,00,000
Less :Selling & administrative expense	$          20,00,000
Less : Depreciation	$            1,50,000
EBIT	$          48,50,000

Total assets = 9000000 ( given)

Operating ROA = $ 4850000 / $ 9000000

= 0.54

i.e., 54%

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