Question

The Purple Martin has annual sales of $4,500, total debt of $1,400, total equity of $2,400,...

The Purple Martin has annual sales of $4,500, total debt of $1,400, total equity of $2,400, and a profit margin of 6 percent. What is the return on assets? Start by calculating Net Income and Total Assets.

Multiple Choice

  • 11.25%

  • 6.00%

  • 8.26%

  • 7.11%

  • 19.29

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Homework Answers

Answer #1

Solution:-

To Calculate Return on Assets -

Net Income = Sales * Profit Margin

Net Income = $4,500 * 0.06

Net Income = $270

Total Assets = Total Debt + Total Equity

Total Assets = $1,400 + $2,400

Total Assets = $3,800

Return on Assets =

Return on Assets =

Return on Assets = 7.11%

The Correct Answer is point D i.e. 7.11%

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