Financial statements for Orange Company appear below: Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $100.

-Orange Company's return on total assets for Year 2 was closest to:
A)15.5%
B)15.9%
C)16.5%
D)14.5%

Question

Financial statements for Orange Company appear below:   Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $100.

-Orange Company's return on total assets for Year 2 was closest to:
A)15.5% 
B)15.9% 
C)16.5% 
D)14.5%

Quizplus · Accepted Answer

Adjusted net income = Net income + [Interest expense F1F1F1S1F1F1F10 (1-Tax rate)]
= $336 + [$30 F1F1F1S1F1F1F10 (1 - 0.30)] = $357
Average total assets = ($2,210 + $2,130)F1F1F1S1F1F1F10 2 = $2,170
Return on total assets = Adjusted net income F1F1F1S1F1F1F10 Average total assets
= $357 F1F1F1S1F1F1F10 $2,170 = 16.5%

Financial Statements for Orange Company Appear Below: Dividends