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%?
A)Better.
B)Worse.
C)Same as.

Question

Quizplus · Accepted Answer

Tech Track's cash return on assets (CROA) is calculated by dividing net cash flows from operating activities by average total assets. The average total assets for the year = ($400,000 + $500,000) / 2 = $450,000. CROA = $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