Lake Coffee Company reported net income of $54,000 and net sales totals $800,000

Accounting Dec 01, 2020

Lake Coffee Company reported net income of $54,000 and net sales totals $800,000. The company's asset turnover is 4.5 times. What was the company's return on assets? 14.81% 30.38% O 6.75% O 3.29%

Expert Solution

Calculation of the company's return on assets is as follows:

Return on assets = Net profit margin ratio x Assets turnover ratio

= 6.75% x 4.5

=30.38%

Therefore, the company's return on assets is 30.38% and hence, option (b) i.e. 30.38% is the correct answer.

Note: Calculation of net profit margin ratio as follows:

Net profit margin ratio = (Net income / Sales) x 100

= ($54,000 / $800,000) x 100

= 6.75%

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