Question

Sub Station and Planet Sub reported the following selected financial data ($ in thousands). Sub Station's business strategy is to sell the best tasting sandwich with the highest quality ingredients. Planet Sub's business strategy is to sell the lowest cost sub on the planet.
Sub Station Planet Sub
Net sales $108,249 $62,071
Net Income 25,922 3.492
Total assets, beginning 75,183 38,599
Total assets, ending 116,371 44,533
Required:
1. Calculate Sub Station's return on assets, profit margin, and asset turnover ratio.

Answer 1

Answer:

The computations are shown below:

Explanation:

Return On Assets = Net income ÷ Average Total Assets × 100

where,

Average of Assets =  (Beginning Total Assets + Ending Total Assets) ÷ 2

= ($75,183 + $116,371) ÷ 2

= $191,554 ÷ 2

= $95,777

So, the return on investment is  

=$25,922 ÷ $95,777 × 100

= 27.06%

Profit Margin = Net income ÷ Sales × 100

= $25,922 ÷ $108,249 × 100

= 23.95%

Assets Turnover = Sales ÷ Average of  Total Assets

= $108,249 ÷$95,777

= 1.13