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1 August, 04:25

The following is an extract of Aster Inc.'s balances:

Items

Amount ($)

Opening inventory 20,000

Closing inventory 10,000

Sales

50,000

What is Aster's return-on-assets ratio?

A. 2

B.

4

C. 3

D. 5

+3
Answers (1)
  1. 1 August, 07:21
    0
    C. 3

    Explanation:

    Return on Assets ratio = Net income after tax / average total assets.

    Average total asset is opening total assets + ending total asset / 2

    Also, inventory turn over ratio is sales / average inventory

    Since no information is given on net income after tax and total assets hence Aster's return on asset ratio cannot be calculated.

    His inventory turnover will be;

    Average inventory = Opening inventory + Ending inventory / 2

    $20,000 + $10,000 = $30,000

    $30,000/2 = $15,000

    Since sales is $50,000, therefore

    $50,000/$15,000 = 3.3
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