In: Finance
Category |
Prior year |
Current year |
Accounts payable |
41,400 |
45,000 |
Accounts receivable |
115,200 |
122,400 |
Accruals |
16,200 |
13,500 |
Additional paid in capital |
200,000 |
216,660 |
Cash |
??? |
??? |
Common Stock @ par value |
37,600 |
42,000 |
COGS |
131,400 |
170,550.00 |
Depreciation expense |
21,600 |
22,669.00 |
Interest expense |
16,200 |
16,971.00 |
Inventories |
111,600 |
115,200 |
Long-term debt |
135,000 |
139,896.00 |
Net fixed assets |
379,919.00 |
399,600 |
Notes payable |
59,400 |
64,800 |
Operating expenses (excl. depr.) |
50,400 |
64,100.00 |
Retained earnings |
122,400 |
136,800 |
Sales |
255,600 |
338,777.00 |
Taxes |
9,900 |
19,248.00 |
What is the current year's return on assets (ROA)?
Return on assets is calculated by using the below formula:
= Net Income / Average total assets
Net Income = Sales - COGS - Depreciation - interest expense - operating expenses - taxes
= 338,777 - 170,550 - 22,669 - 16,971 - 64,100 - 19,248
= 45,239
Total Assets = Total Liabilities + Equity
Total Assets of prior year = Accounts payable + Accruals + Additional paid in capital + Common stock @ par value + Long term debt + Notes payable + Retained Earnings
= 41,400 + 16,200 + 200,000 + 37,600 + 135,000 + 59,400 + 122,400
= 612,000
Hence the total assets of prior year are 612,000
Total Assets of current year = Accounts payable + Accruals + Additional paid in capital + Common stock @ par value + Long term debt + Notes payable + Retained Earnings
= 45,000 + 13,500 + 216,660 + 42,000 + 139,896 + 64,800 + 136,800
= 658,656
Hence the total assets of current year are 658,656
So the average total assets is
= (612,000 + 658,656) / 2
= 635,328
So the return on assets will be
= Net Income / Average total assets
= 45,239 / 635,328
= 0.0712 or 7.12% Approximately
Feel free to ask in case of any query relating to this question