Fundamental Accounting Principles
Fundamental Accounting Principles
23rd Edition
ISBN: 9781259536359
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 15, Problem 9BTN
To determine

Introduction:

Return on total Assets: The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:

Return on assets = Net incomeAverage Total Assets

Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:

Average total Assets = (Beginning total assets + Ending total assets)2

Return on total Assets ratio can be broken into its components as follows:

Profit Margin Ratio:

Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:

Profit Margin = Operating IncomeSales

Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

Asset Turnover Ratio = SalesAverage total assets

Requirement-1:

To Calculate: The Return on total assets using in its separate components for Samsung for two most recent years

To determine

Requirement-2:

To Analyze: The Company’s performance using Return on total assets ratios

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Chapter 15 Solutions

Fundamental Accounting Principles

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