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Two entreprenuers borrowed $50,000 at 10% interest from members of families and each put up $30,000...
Two entreprenuers borrowed $50,000 at 10% interest from members of families and each put up $30,000 in equity capital. Retail space was rented and $60,000 was spent for fixtures and store equipment. For their venture after one complete. year of operation, they asked you to do a financial ratio analysis. Here are the data you collected until today. Calculate the operating return on assets.
Sales: $320,000. Operating Costs: 285,000. Depreciation: 10,000. Interest: 5,000 Taxes: 6,000. Cash: $20,000. Receivables: 30,000. Inventories: 50,000. Net Fixed Assets: 50,000. Payables: 22,000. Accruals: 18,000. Long-Term Loan: 50,000. Common Equity; 60,000
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Expert Solution
Calculating the Operating Profit(EBIT) :-
| Particular | Amount in $ |
| Sales | 320,000.00 |
| Less: Operating Costs | (285,000.00) |
| Less: Depreciation | (10,000.00) |
| Operating Profit(EBIT) | 25,000.00 |
- Total Assets = Cash + Receivables + Inventory + Net Fixed Assets
Total Assets = $20,000 + $30,000 + $50,000 + $50,000
Total Assets = $150,000
- Operating return on Assets = EBIT/Total Assets
Operating return on Assets = $25,000/$150,000
Operating return on Assets = 16.67%
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jeff jeffy answered 2 years agoRelated Solutions
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