The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year, respectively. Sales revenues are $1.1 million ($0.8 million in the previous year), net income is $40,000, and net cash flows from operating activities are $50,000. How does Tech Track's cash return on assets compare to the industry average of 10%?

Question

Quizplus · Accepted Answer

The cash return on assets is calculated as net cash flows from operating activities divided by average total assets. For Tech Track, this is $50,000 / (($400,000 + $500,000) / 2) = $50,000 / $450,000 = 11.11%, which is better than the industry average of 10%.

The Balance Sheet of Tech Track Reports Total Assets of $400,000