Question

Question 15 (1 point)

The Golden Eagle Corporation has the following items on their income and balance sheets (values in tables are in thousands:

Balance Sheet Items
(Assets)

	Last Year	Two Years Ago
Cash	420	440
Accounts Receivable	590	510
Inventory	282	285
Total Current Assets
Fixed Assets	5000	4860
Depreciation	2295	2061
Net Fixed Assets

Balance Sheet Items
(Liabilities)

Accounts Payable	590	540
Notes Payable	81	91
Total Current Liabilities
Long Term Liabilities	1030	990
Total Liabilities
Preferred Stock	100	100
Common Stock	323	323
Retained Earnings	1350	1060
Total Liabilities and Equity

Income Statement Items

	Past Year	Two Years Ago
Sales	3040	2800
Cost of Goods Sold	1830	1760
Operating Expenses	575	540
Interest Paid	95	92
Taxes Paid	87	77
Preferred Stock Dividends Paid	94	25

Using the Dupont System of Analysis, what is the Return on Assets last year for Golden Eagle? (Show answer to two decimal places.)

Your Answer:

Answer 1

Using the dupont system analysis the return on assets can be calculated using the below formula
Return on assets = Net profit margin*Asset turnover
Return on assets is the income earned by the company based on capital investment made by company
Net profit margin is the percentage of income earned on the sales made by the company
Asset turnover indicates the efficiency of the company in using its assets to generate revenue.
Return on assets = (Net income/Revenue)*(Revenue/Average total assets)
Net income = Sales - cost of goods sold - Operating expenses - Interest paid - Taxes paid
Net income last year	(3040-1830-575-95-87)
Net income last year	453
Total assets last year	(420+590+282+5000-2295)
Total assets last year	3997
Total assets two years ago	(440+510+285+4860-2061)
Total assets two years ago	4034
Return on assets	(453/3040)*(3040/((3997+4034)/2)
Return on assets	(453/3040)*(3040/4015.50)
Return on assets	0.149013*0.757066
Return on assets	11.28%
The return on assets last year for Golden Eagle is 11.28%