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Using Financial Statements for 2020, return on assets for the year 2020 is 0.28.  True or False?

Using Financial Statements for 2020, return on assets for the year 2020 is 0.28.  True or False?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Using Financial Statements for 2020, return on assets for the year 2020 is 0.28. 

True or False?

### Financial Statements Overview - 2020 #### Balance Sheet **Assets** - **Cash**: $280,000 - **Accounts Receivable**: $117,600 - **Inventory**: $89,600 - **Prepaid Expenses**: $14,000 **Total Current Assets**: $501,200 - **Fixed Assets**: $33,600 **Total Assets**: $534,800 **Liabilities & Equity** - **Accounts Payable**: $90,916 - **Notes Payable**: $48,132 - **Accrued Expenses**: $42,784 - **Taxes Payable**: $37,436 - **Deferred Taxes**: $48,132 **Total Current Liabilities**: $267,400 - **Long-Term Notes**: $123,004 **Total Liabilities**: $390,404 - **Capital Stock**: $53,480 - **Retained Earnings**: $90,916 **Total Equity**: $144,396 **Total Liabilities & Equity**: $534,800 #### Income Statement - **Sales**: $530,000 - **Cost of Goods Sold**: $148,400 **Gross Profit**: $381,600 - **Interest Income**: $53,200 **Total Income**: $434,800 - **Sales Salaries**: $121,900 - **Office Salaries**: $26,500 - **Office Equipment Rental**: $37,100 - **Interest Expense**: $15,900 - **General & Administrative**: $4,770 **Total Expenses**: $206,170 - **Income Before Tax**: $228,430 - **Income Taxes**: $132,500 **Net Income**: $95,930 This summary represents a snapshot of financial performance and position for the year 2020, indicating profitability and asset management efficiency.
Transcribed Image Text:### Financial Statements Overview - 2020 #### Balance Sheet **Assets** - **Cash**: $280,000 - **Accounts Receivable**: $117,600 - **Inventory**: $89,600 - **Prepaid Expenses**: $14,000 **Total Current Assets**: $501,200 - **Fixed Assets**: $33,600 **Total Assets**: $534,800 **Liabilities & Equity** - **Accounts Payable**: $90,916 - **Notes Payable**: $48,132 - **Accrued Expenses**: $42,784 - **Taxes Payable**: $37,436 - **Deferred Taxes**: $48,132 **Total Current Liabilities**: $267,400 - **Long-Term Notes**: $123,004 **Total Liabilities**: $390,404 - **Capital Stock**: $53,480 - **Retained Earnings**: $90,916 **Total Equity**: $144,396 **Total Liabilities & Equity**: $534,800 #### Income Statement - **Sales**: $530,000 - **Cost of Goods Sold**: $148,400 **Gross Profit**: $381,600 - **Interest Income**: $53,200 **Total Income**: $434,800 - **Sales Salaries**: $121,900 - **Office Salaries**: $26,500 - **Office Equipment Rental**: $37,100 - **Interest Expense**: $15,900 - **General & Administrative**: $4,770 **Total Expenses**: $206,170 - **Income Before Tax**: $228,430 - **Income Taxes**: $132,500 **Net Income**: $95,930 This summary represents a snapshot of financial performance and position for the year 2020, indicating profitability and asset management efficiency.
Expert Solution
Step 1

Return on asset shows the profitability or profit making efficiency of the company with the use of its total asset. It shows how profitable the company is in using its asset to generate income.

Return on asset = Net income / total asset

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