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24 June, 11:08

Lein's net income is $200,000 and its operating cash flows are $240,000. The company reports total assets of $1.6 million and $1.8 million at the end of the prior and current year, respectively. Cash return on assets (rounded to one-tenth of a percent) is:

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  1. 24 June, 13:00
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    14.1%

    Explanation:

    Cash return on assets is the ratio of a company's operating cash flow to its average total assets. It shows how a company is generating cash flow from its assets and compares a company's profitability with other companies.

    Cash return on assets = operating cash flow / average total assets

    Given that:

    operating cash flows = $240,000

    Average total assets = ($1.6 million + $1.8 million) / 2 = $1.7 million.

    Therefore, Cash return on assets = $240000 / $1.7 million = 0.141 = 14.1%
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