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25 May, 17:24

A fire has destroyed a large percentage of the financial records of the Inferno Company. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 14.9 percent. Sales were $1,750,000, the total debt ratio was. 33, and total debt was $651,000. What is the return on assets (ROA)

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  1. 25 May, 19:57
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    9.98%

    Explanation:

    The total debt was $651,000

    And, the total debt ratio is 0.33

    So by considering the above information, we can find out the total assets value which is

    = $651,000 : 0.33

    = $1,972,727.27

    Now according to the accounting equation

    The total assets = Total liabilities + owners equity

    $1,972,727.27 = $651,000 + owners equity

    So, owners equity = $1,321,727.27

    And, the return on equity is

    Return on equity = (Net income) : (total equity)

    14.9% = Net income : $1,321,727.27

    Hence, net income = $196,937

    And, the return on assets equal to

    = (Net income) : (Total assets)

    = $1,321,727.27 : $1,972,727.27

    = 9.98%
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