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29 January, 06:53

Cullumber Company reports the following information (in millions) during a recent year: net sales, $12,105.0; net earnings, $355.0; total assets, ending, $5,825.0; and total assets, beginning, $4,090.0. Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin.

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  1. 29 January, 08:42
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    1. 0.07161

    2. 2.43

    3. 0.02932

    Explanation:

    1. The computation of the return on total assets is shown below:

    Return on assets = (Net income) : (average of total assets)

    where,

    Net income is $355

    Average total assets = (Beginning total assets + ending total assets) : 2

    = ($4,090 + $5,825) : 2

    = $4,957.50

    Now put these values to the above formula

    So, the ratio would equal to

    = $355 : $4,957.50

    = 0.07161

    2. The computation of the assets turnover is shown below:

    Total asset turnover = (Net Sales : average of total assets)

    = ($12,105 : $4,957.50)

    = 2.43

    3. The computation of the profit margin is shown below:

    = (Net earnings : net sales) * 100

    = ($355 : $12,105) * 100

    = 0.02932
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