The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45 , 000 Accounts receivable (net) 30 , 000 Inventory 40 , 000 Property, plant and equipment 310 , 000 ‾ Total Assets $ 425 , 000 \begin{array}{lr} ext { Assets }\ ext { Cash and short-term investments } & \$ 45,000 \ ext { Accounts receivable (net) } & 30,000 \ ext { Inventory } & 40,000 \ ext { Property, plant and equipment } & \underline{310,000} \\quad ext { Total Assets } & \$ 425,000 \\end{array} Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $45 , 000 30 , 000 40 , 000 310 , 000 $425 , 000 Liabilities and Stockholders’ Equity Current liabilities $ 55 , 000 Long-term liabilities 110 , 000 Stockholders’ equity—common 260 , 000 Total Liabilities and Stockholders’ Equity $ 425 , 000 \begin{array}{lr} ext { Liabilities and Stockholders ' Equity }\ ext { Current liabilities } & \$ 55,000 \ ext { Long-term liabilities } & 110,000 \ ext { Stockholders ' equity—common } & 260,000 \\quad ext { Total Liabilities and Stockholders ' Equity } & \$ 425,000\end{array} Liabilities and Stockholders’ Equity Current liabilities Long-term liabilities Stockholders’ equity—common Total Liabilities and Stockholders’ Equity $55 , 000 110 , 000 260 , 000 $425 , 000 Income Statement Sales $ 120 , 000 Cost of goods sold 65 , 000 Gross profit 55 , 000 Operating expenses 29 , 500 Net income 25 , 500 Number of shares of common stock $ 6 , 000 Market price of common stock $ 20 Dividends per share . 50 \begin{array}{lr} ext { Income Statement }\ ext { Sales } & \$ 120,000 \ ext { Cost of goods sold } & 65,000 \ ext { Gross profit } & 55,000 \ ext { Operating expenses } & 29,500 \\quad ext { Net income } & 25,500 \\ ext { Number of shares of common stock } & \$ 6,000 \ ext { Market price of common stock } & \$20 \ ext { Dividends per share } & .50\end{array} Income Statement Sales Cost of goods sold Gross profit Operating expenses Net income Number of shares of common stock Market price of common stock Dividends per share $120 , 000 65 , 000 55 , 000 29 , 500 25 , 500 $6 , 000 $20 .50 What is the return on assets for Ortiz?A) 6.0%B) 5.0%C) 10.0%D) 12.0%

Question

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.    Assets   Cash and short-term investments  $ 45 , 000  Accounts receivable (net)   30 , 000  Inventory  40 , 000  Property, plant and equipment  310 , 000 ‾  Total Assets  $ 425 , 000 \begin{array}{lr}	ext { Assets }\	ext { Cash and short-term investments }  &  \$ 45,000 \	ext { Accounts receivable (net)  }  &  30,000 \	ext { Inventory }  &  40,000 \	ext { Property, plant and equipment }  &  \underline{310,000} \\quad 	ext { Total Assets }  &  \$ 425,000 \\end{array}  Assets   Cash and short-term investments   Accounts receivable (net)    Inventory   Property, plant and equipment   Total Assets  ​ $45 , 000 30 , 000 40 , 000 310 , 000 ​ $425 , 000 ​  Liabilities and Stockholders’ Equity   Current liabilities  $ 55 , 000  Long-term liabilities  110 , 000  Stockholders’ equity—common  260 , 000  Total Liabilities and Stockholders’ Equity  $ 425 , 000 \begin{array}{lr}	ext { Liabilities and Stockholders '  Equity }\	ext { Current liabilities }  &  \$ 55,000 \	ext { Long-term liabilities }  &  110,000 \	ext { Stockholders '  equity—common }  &  260,000 \\quad 	ext { Total Liabilities and Stockholders '  Equity }  &  \$ 425,000\end{array}  Liabilities and Stockholders’ Equity   Current liabilities   Long-term liabilities   Stockholders’ equity—common   Total Liabilities and Stockholders’ Equity  ​ $55 , 000 110 , 000 260 , 000 $425 , 000 ​  Income Statement   Sales  $ 120 , 000  Cost of goods sold  65 , 000  Gross profit  55 , 000  Operating expenses  29 , 500  Net income  25 , 500  Number of shares of common stock  $ 6 , 000  Market price of common stock  $ 20  Dividends per share  . 50 \begin{array}{lr}	ext { Income Statement }\	ext { Sales }  &  \$ 120,000 \	ext { Cost of goods sold }  &  65,000 \	ext { Gross profit }  &  55,000 \	ext { Operating expenses }  &  29,500 \\quad 	ext { Net income }  &  25,500 \\	ext { Number of shares of common stock }  & \$ 6,000  \	ext { Market price of common stock }  & \$20 \	ext { Dividends per share }  &  .50\end{array}  Income Statement   Sales   Cost of goods sold   Gross profit   Operating expenses   Net income   Number of shares of common stock   Market price of common stock   Dividends per share  ​ $120 , 000 65 , 000 55 , 000 29 , 500 25 , 500 $6 , 000 $20 .50 ​ What is the return on assets for Ortiz?A)  6.0%B)  5.0%C)  10.0%D)  12.0%

Pittman Reunion · Accepted Answer

Final Answer : A, Explanation :  Return on Assets (ROA) is calculated as Net Income divided by Total Assets. Here, Net Income is $25,500 and Total Assets are $425,000. So, ROA = ($25,500 / $425,000) * 100 = 6.0%.

Definitions

Learning Objectives

Learning Objectives

Related questions