Gwen's Pastry Shop has annual sales of $238,000, a profit margin of 6 %, and a return on assets of 7.7 %. The firm has _____ in total assets.

Question

Quizplus · Accepted Answer

To find the total assets, we use the formula for return on assets (ROA) = Net Income / Total Assets. First, calculate the net income (profit) by applying the profit margin to the annual sales: $238,000 * 6% = $14,280. Then, rearrange the ROA formula to solve for total assets: Total Assets = Net Income / ROA = $14,280 / 7.7% = $185,455.

Gwen's Pastry Shop Has Annual Sales of $238,000, a Profit