A fire has destroyed a large percentage of the financial rec

A fire has destroyed a large percentage of the financial records of the Excandesco Company. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 16.1 percent. Sales were $1,780,000, the total debt ratio was .31, and total debt was $657,000. What is the return on assets (ROA)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Return on assets References eBook& Resources Worksheet Learning Objective: 03-02 Compute and, more important, interpret some common ratios. Difficulty: 2 Intermediate Section: 3.2 Ratio Analysis Check my work 24

Solution

When debt ratio is 0.31 and total debt is $657000 then total assets = 657000/0.31 = $2119355

Total equity = 2119355-657000 = 1462355

Return = 1462355*16.1% = 235439.155

Return on assets = 235439.155*100/2119355 = 11.11%