Selected financial data from the June 30 year-end statements of Safford Company

ID: 2493855 • Letter: S

Question

Selected financial data from the June 30 year-end statements of Safford Company are given below:

Total assets at the beginning of the year were $5,700,000; total stockholders’ equity was $1,900,000. The company’s tax rate is 30%.

Compute the return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Compute the return on equity. (Round your percentage a

Selected financial data from the June 30 year-end statements of Safford Company are given below:

Return on total assets = Net income before interest/Average total assets

Net income before interest = Net income after interest + Interest

= $410,000 + $59,000

= $469,000

Average total assets = Opening total assets + Closing total assets/2

= $5,700,000 + $5,900,000/2

= $5,800,000

Return on total assets = Net income before interest/Average total assets

= $469,000/$5,800,000

= 0.081 or 8.1%

Return on equity = Net income/Total shareholders’ equity

= $410,000/$1,900,000

= 0.2158 or 21.58%

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