The financial statements for Castile Products, Inc., are given below: Account ba

Question

The financial statements for Castile Products, Inc., are given below:

     Account balances at the beginning of the year were: accounts receivable, $210,000; and inventory, $290,000. All sales were on account. Assets at the beginning of the year totaled $1,060,000, and the stockholders’ equity totaled $655,000.

Compute the following:

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

The financial statements for Castile Products, Inc., are given below:

Explanation / Answer

Average assets = (1,060,000 + 1,499,000) / 2

= 1,279,500

Return on total assets = Net income / Average assets

= 184,800 / 1,279,500

= 14.4

Average equity = (909,000 + 655,000) / 2

= 782,000

Return on equity = Net income / Average equity

= 184,800 / 782,000

= 23.6

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