Question
In: Accounting
The following financial information was taken from a firm’s accounting records on December 31, 2017. Use...
The following financial information was taken from a firm’s accounting records on December 31, 2017. Use this information to determine the items below. Net Sales $ 800,000 Net Income Before Income Tax 45,000 Income Tax Expense 6,750 Net Income After Income Tax 38,250 Total Assets 400,000 Find the following 1. Rate of returns on net sales. 2. Rate of return on total assets. 3. Asset turnover.
Solutions
Expert Solution
1. Rate of returns on net sales.
Rate of returns on net sales = [ Net Income after Tax / Net Sales ] x 100
= [ $38,250 / $800,000 ] x 100
= 4.78%
2. Rate of return on total assets
Rate of return on total assets = [ Net Income after Tax / Total Asset ] x 100
= [ $38,250 / $400,000 ] x 100
= 9.56%
3. Asset turnover
Asset turnover = Net Sales / Total Assets
= $800,000 / $400,000
= 2 Times
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