Determine the asset intensity of a venture with the following financial information: net profit = $22,000; revenues = $132,000; and return on assets 30%.
A)0.1
B)0.6
C)1.8
D)2.0

Question

Quizplus · Accepted Answer

Asset intensity = Total assets/Revenues 
Return on assets = Net profit/Total assets 
Given return on assets = 30%, net profit = $22,000 
Therefore, Total assets = Net profit/Return on assets = $22,000/0.30 = $73,333.33 
And Asset intensity = Total assets/Revenues = $73,333.33/$132,000 = 0.555, which is approximately 0.6. Thus, the answer is B.

Determine the Asset Intensity of a Venture with the Following