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18 September, 04:00

Shelton inc. has sales of $23.8 million; total equity of $31.3 million; and total debt of $16.7 million. if shelton's profit margin is 8 percent, calculate the company's return on assets (roa).

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  1. 18 September, 06:47
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    Sales = $23.8 million

    Total equity = $31.3 million

    Total debt = $16.7 million

    Profit margin = 8% = 0.08

    Return of assets = ?

    First we calculate the total assets:

    Total assets = Total debt + Total equity

    = $16.7 million + $31.3 million = $48 million

    Now find net income by using this formula:

    Profit margin = Net income / Sales

    Net income = Profit Margin * Sales = 0.08 x 23,800,000 = $1,904,000 Now calculate Return of assets: Return on assets = Net income / Total assets = $1,904,000 / 48,000,000

    Return on assets = 3.967%
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