Return on total assets ratio: net income/ average total assets 21,331/(321,195+225,248)/2= 0.07807= 7.8% (2020 year) 11588/(162,648+225,248)/2= 0.059= 6.0% (2019 year) Write financial analysis report.
Return on total assets ratio: net income/ average total assets 21,331/(321,195+225,248)/2= 0.07807= 7.8% (2020 year) 11588/(162,648+225,248)/2= 0.059= 6.0% (2019 year) Write financial analysis report.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Return on total assets ratio: net income/ average total assets
21,331/(321,195+225,248)/2= 0.07807= 7.8% (2020 year)
11588/(162,648+225,248)/2= 0.059= 6.0% (2019 year)
Write financial analysis report.
![**Title: Understanding the Return on Total Assets Ratio**
---
**Return on Total Assets Ratio Formula:**
\[
\text{Return on Total Assets Ratio} = \frac{\text{Net Income}}{\text{Average Total Assets}}
\]
---
**Calculation Breakdown:**
1. **Net Income:** $11,588
2. **Total Assets:**
- Year 1: $225,248
- Year 2: $162,648
\[
\text{Average Total Assets} = \frac{(225,248 + 162,648)}{2} = 193,948
\]
**Return Calculation:**
\[
\frac{11,588}{193,948} \approx 0.05974
\]
Converted to percentage: **6.0%**
3. **Alternative Example:**
- Net Income: $21,331
- Total Assets:
- Year 1: $321,195
- Year 2: $225,248
\[
\text{Average Total Assets} = \frac{(321,195 + 225,248)}{2} = 273,221.5
\]
**Return Calculation:**
\[
\frac{21,331}{273,221.5} \approx 0.07807
\]
Converted to percentage: **7.8%**
---
**Summary:**
The Return on Total Assets Ratio is a metric used to assess a company's ability to generate earnings from its assets. The higher the percentage, the more efficiently a company is using its assets to produce net income. In the examples above, the calculated ratios indicate different levels of asset efficiency.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c12a0bd-7f17-4126-bc61-675beb7b01fb%2Ffb04f5ca-41ae-44ff-b700-373a74f201db%2Fspq196k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Title: Understanding the Return on Total Assets Ratio**
---
**Return on Total Assets Ratio Formula:**
\[
\text{Return on Total Assets Ratio} = \frac{\text{Net Income}}{\text{Average Total Assets}}
\]
---
**Calculation Breakdown:**
1. **Net Income:** $11,588
2. **Total Assets:**
- Year 1: $225,248
- Year 2: $162,648
\[
\text{Average Total Assets} = \frac{(225,248 + 162,648)}{2} = 193,948
\]
**Return Calculation:**
\[
\frac{11,588}{193,948} \approx 0.05974
\]
Converted to percentage: **6.0%**
3. **Alternative Example:**
- Net Income: $21,331
- Total Assets:
- Year 1: $321,195
- Year 2: $225,248
\[
\text{Average Total Assets} = \frac{(321,195 + 225,248)}{2} = 273,221.5
\]
**Return Calculation:**
\[
\frac{21,331}{273,221.5} \approx 0.07807
\]
Converted to percentage: **7.8%**
---
**Summary:**
The Return on Total Assets Ratio is a metric used to assess a company's ability to generate earnings from its assets. The higher the percentage, the more efficiently a company is using its assets to produce net income. In the examples above, the calculated ratios indicate different levels of asset efficiency.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education