Videos
Requirement-1:
The
Requirement-1:
Answer to Problem 15E
The Return on Investment for the past year is 8%
Explanation of Solution
The Return on Investment for the past year is calculated as follows:
| ZNet Co. | |
| Past year | |
| Operating Income (A) | $1,000,000 |
| Average Invested Assets (B) | $ 12,500,000 |
| Return on Investment (C) = A/B = | 8.00% |
Concept 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:
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:
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:
Investment Turnover Ratio:
Investment Turnover Ratio compares the sales with respect to the Average assets invested in the business. The formula to calculate the Investment Turnover Ratio is = Sales / Average Assets invested
Requirement-2:
The Profit Margin for the past year
Requirement-2:
Answer to Problem 15E
The Profit Margin for the past year is 20%
Explanation of Solution
The Profit Margin for the past year is calculated as follows:
| ZNet Co. | |
| Past year | |
| Operating Income (A) | $1,000,000 |
| Sales (B) | $5,000,000 |
| Profit Margin (C) = A/B = | 20.00% |
Concept 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:
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:
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:
Investment Turnover Ratio:
Investment Turnover Ratio compares the sales with respect to the Average assets invested in the business. The formula to calculate the Investment Turnover Ratio is = Sales / Average Assets invested
Requirement-3:
The Return on investment for the next year
Requirement-3:
Answer to Problem 15E
The Return on investment for the next year shall be 9.60%
Explanation of Solution
The Return on investment for the next year is calculated as follows:
| ZNet Co. | |
| Next year | |
| Sales (A) (5,000,000*120%) | $6,000,000 |
| Profit Margin (B) | 20% |
| Operating Income (C) =A*B = | $1,200,000 |
| Average Invested Assets (D) | $ 12,500,000 |
| Return on Investment (E) = C/D = | 9.60% |
Concept 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:
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:
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:
Investment Turnover Ratio:
Investment Turnover Ratio compares the sales with respect to the Average assets invested in the business. The formula to calculate the Investment Turnover Ratio is = Sales / Average Assets invested
Requirement-4:
The Investment Turnover for the next year
Requirement-4:
Answer to Problem 15E
The Investment Turnover for the next year shall be 0.48
Explanation of Solution
The Investment Turnover for the next year is calculated as follows:
| ZNet Co. | |
| Next year | |
| Sales (A) (5,000,000*120%) | $6,000,000 |
| Average Invested Assets (B) | $ 12,500,000 |
| Investment Turnover (C) = A/B = | 0.48 |
Want to see more full solutions like this?
Chapter 24 Solutions
Fundamental Accounting Principles
- Accurate answerarrow_forwardWhat was the balance in retained earning at December 31?arrow_forwardCarlisle Industries has a cash cycle of 50.2 days, an operating cycle of 74 days, and an inventory period of 33 days. The company reported cost of goods sold in the amount of $392,000, and credit sales were $620,000. What is the company's average balance in accounts payable and accounts receivable?arrow_forward
- Please given answer general accountingarrow_forwardPlease give me true answer this financial accounting questionarrow_forwardRick Company began the accounting period with $56,500 of merchandise, and the net cost of purchases was $263,000. A physical inventory count showed $68,000 of merchandise unsold at the end of the period. The cost of goods sold of Rick Company for the period is ?arrow_forward
- Hi experts please provide solution this general accounting questionarrow_forwardOn July 1, Archer Ltd. has retained earnings of $45,320. Revenues for July were $8,250. Expenses for July were $3,140. In July, the company paid out a total of $1,120 in dividends to its shareholders. What is the value of retained earnings on July 31?arrow_forwardWhich inventory costing method is prohibited under IFRS? a) FIFO b) Weighted average c) LIFO d) Specific identificationarrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education