Computing rate of return on total assets

Montane Exploration Company reported these figures for 2018 and 2017:

Income statement: Partial

2018

2017

Interest expenses

\(16,700,000

\)16,500,000

Net income

16,900,000

20,200,000

Balance sheet: Partial

Dec 31, 2018

Dec 31, 2017

Total assets

\(316,000,000

\)420,000,000

Compute the rate of return on total assets for 2018. (Round to two decimals.)

Short Answer

Expert verified

The rate of return on total assets is9.13%.

Step by step solution

01

Definition of Total Assets

Total assets can be defined as the total amount of resources the business entity possesses for operating a business. It includes resources such as machinery, plant and building.

02

Calculation of Rate of Return on Total Assets

Rateofreturnontotalassets=Netincome+InterestexpensesBeginningassets+Endingassets2×100=$16,900,000+$16,700,000$316,000,000+$420,000,0002×100=$33,600,000$368,000,000×100=9.13%

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