25) The Hummel Corporation reported the following income statement and balance s

Question

25) The Hummel Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current vear End of current vear End of prior vear Net sales revenue (all credit) Cost of goods sold Gross profit Selling/general expenses Interest expense Net income Current assets Long-term assets Total assets Current liabilities Long-term liabilities Common stockholders' equity Total liabilities and stockholders' equit $800,000 $504,000 $%296,000 $184,000 $ 32,000 $ 80,000 $ 71,000 $329,000 $400,000 $ 56,000 $84,000 $260,000 $400,000 $20,000 $280,000 $300,000 $16,000 $164,000 $120,000 $300,000 Inventory and prepaid expenses account for $28,000 of the current year's current assets Average inventory for the current year is $12,000 Average net accounts receivable for the current year is $32,000 There are 40,000 shares of common stock outstanding Total dividends paid during the current year were $60,000 The market price per share of common stock is $25 What is the company's rate of return on total assets for the current year? A) 0.35% B) 32% C) 28% D) 22.86%

Explanation / Answer

RETURN ON TOTAL ASSETS = (NET INCOME+INTEREST)/AVERAGE TOTAL ASSETS*100 THE LOGIC BEHIND THIS FORMULA IS TOTAL ASSETS INVOLVES DEBT CAPITAL AS WELL AS SHARE HORE HOLDERS EQITY AND INTEREST IS REWARD TO FORMER AND NET INCOME BELONGS TO THE LATER AVERAGE TOTAL ASSETS        = (400000+300000)/2 = 350000 RETURN ON TOTAL ASSETS = (80000+32000)350000*100 = 32%

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.