Flingers Inc. reveals the following information in their annual report for FY 2004. Earnings and Expenses Sales $10,000,000 Cost of goods sold $5,000,000 Pre-tax earnings $500,000 Merchandise inventory $80,000 Total assets $2,000,000 What is Flingers' return on assets.

Flingers saves in purchasing has the same impact as what amount of increased sales?

return on Assets 25%

Explanation:

Return on Asset is the ratio of net income ratio to total asset of the company. It measure the productivity and efficiency of all the assets used to generate this net income.

According to given data

Sales $10,000,000

Cost of goods sold $5,000,000

Pre-tax earnings $500,000

Merchandise inventory $80,000

Total assets $2,000,000

As there is no tax rate is given, we will use the Pre-Tax Earnings for Return on assets ratio.

Return on Assets = Pre-Tax Earnings / Total Assets = $500,000 / 2,000,000

Return on Assets = 0.25 = 25%

Saving in purchasing will decrease the cost of gods sold and Increase the gross profit of the Company.