Company A has the following performance measures. What is the return on assets?

Question

Company A has the following performance measures. What is the return on assets? 3.7% 3.9% 4.8% 5.0% Not sufficient information Which of the following statements is true? If an intangible asset has an infinite life, it should be amortized The amortization period of an intangible asset cannot exceed 20 years Goodwill is recorded only when a business is purchased Research and development costs are expensed when incurred, except when the research and development expenditures eventually lead to a patent The city of Madison's public transportation system leases their buses from a third party. In accordance with GAAP, the city of Madison classifies these leases as capital leases. Which of the following statements are TRUE regarding why Madison would prefer to lease rather than own these buses?

Explanation / Answer

Return on assets is the net income divided by the average of total assets.

Now Net Income is (Gross Sales-Sales Discounts)* Profit Margin

= (18,000 - 4,000)* 6%

=840

Now Average of assets is ($20376+$22,554)/2

= $21,465

So Return on assets is 840/21,465 = 3.9%

So, the answer is b.

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