Answer:
The return on assets = 6.53%
Explanation:
Since the debt ratio is 0.47 and the total debt value is $23 million By applying the debt equity formula we can find out the total debt value which is shown below:
Debt ratio = (Total debt ÷ Total assets)
0.47 = ($23 million ÷ Total assets)
So, the total assets = $23 million ÷ 0.47 = $48.94 million
And, the total assets would be equal to
= Total debt + total equity
$48.94 million = $23 million + total equity
So, total equity = $48.94 million - $23 million = $25.94 million
The return on equity is 12.3%. So, here we apply the return on equity formula which is shown below:
Return on equity = (Net income) ÷ (total equity)
12.3% = Net income ÷ $26 million
So, the net income would be $3.198 million
And, Return on assets = (Net income) ÷ (total assets)
= $3.198 million ÷ $48.94 million
Hence, the return on assets = 6.53%
