A fire destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You found the return on equity to equal 13.8 percent. Sales were $979,000, the total debt ratio was. 42, and total debt was $548,000. What is the return on assets?

8%

Explanation:

The formula to compute the return on assets is shown below:

Return on assets = Net income : Total assets

We know that

Total debt ratio = Total debt : Total assets

0.42 = $548,000 : Total assets

So, the total assets is

= $1,304,762

And, the accounting equation is

Total assets = Total liabilities + total stockholder equity

$1,304,762 = $548,000 + total stockholder equity

So, the total stockholder equity is

= $1,304,762 - $548,000

= $756,762

Now

Return on Equity = Net income : Equity

13.8% = Net income : $756,762

So, the net income is $104,433

So, the return on assets equal to

= $104,433 : $1,304,762

= 8%