Assets Cash and short-term investments Accounts receivable (net) Inventory Prope

Question

Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment S 45,000 25,000 20,000 210,000 $300 000 Total Assets Curent liabilities iabilities and Stockholders' Eaquity Current liabilities Long-term liabilities Stockholders' equity-common S 50,000 90,000 160,000 $300.000 Total Liabilities and Stockholders Equity Income Statement Sales Cost of goods sold Gross proft Operating expenses s 120,000 54,000 Net income Number of shares of common tock Market price of common st Dividends per share 6,000 $20 .50 The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on assets for Sampson? 8.0% 70% 18.0% 16.0%

Explanation / Answer

ROA is an economic indicator of finding how well assets are managed to make the firm profitable. Therefore, this is a ratio of net income (NI) to total assets (TA) by a multiplication of 100 to get in percentage form.

ROA = (NI / TA) × 100

         = ($24,000 / $300,000) × 100

         = 8.0 %

Answer: 1st option

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