Rosita's Restaurant has sales of $5,000,total debt of $1,300,total equity of $2,400,and a profit margin of 6%. What is the return on assets?

Question

Quizplus · Accepted Answer

First, we need to calculate the net income of Rosita's Restaurant:

Net Income = Sales x Profit Margin
Net Income = $5,000 x 0.06 = $300

Now we can use the formula for return on assets:

Return on Assets = Net Income / Total Assets

To find Total Assets, we need to add Total Debt and Total Equity:

Total Assets = Total Debt + Total Equity 
Total Assets = $1,300 + $2,400 
Total Assets = $3,700

Return on Assets = $300 / $3,700 
Return on Assets = 0.0811 or 8.11%

Therefore, the best choice is A.

Rosita's Restaurant Has Sales of $5,000,total Debt of $1,300,total Equity