Redriver Company has a 2.5% return on average assets of $500,000 and a net profit ratio of 10%.Redrivers's sales are closest to?

Question

BlackTom AI · Accepted Answer

To solve this, we need to connect two metrics: return on average assets (ROA) and net profit margin.

1) Compute net income from ROA: ROA = net income / average assets. Given ROA = 2.5% and average assets = $500,000,
   net income = 0.025 × 500,000 = $12,500.

2) Use net profit margin to find sales: net profit margin = net income / sales. Given net income = $12,500 and net profit margin = 10%,
   sales = $12,500 / 0.10 = $125,000.

Now evaluate the options:

- Option a: $25,000. If sales were $25,000 and net margin is 10%, net income would be $2,500. ROA would be $2,500 / $500,000 = 0.5%, which does not match the required 2.5% ROA, so this is inconsistent.

- Option b: $100,000. If sales were $100,000 and net margin is 10%, net income would be $10,000. ROA would be $10,000 / $500,000 = 2.0%, which is below the given 2.5%, so this is not correct.

- Option c: $125,000. If sales are $125,000 and net margin is 10%, net income would be $12,500. ROA would be $12,500 / $500,000 = 2.5%, which matches both given metrics exactly. This combination is consistent.

- Option d: $75,000. If sales are $75,000 and net margin is 10%, net income would be $7,500. ROA would be $7,500 / $500,000 = 1.5%, which does not match the required 2.5%, so this is incorrect.

Thus, the sales figure that satisfies both the 2.5% ROA and 10% net profit margin is $125,000, making option c the consistent choice among the given options.

MCD2150 Accounting for Managers - Trimester 2 - 2025

Redriver Company has a 2.5% return on average assets of $500,000 and a net profit ratio of 10%.Redrivers's sales are closest to?

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MCD2150 Accounting for Managers - Trimester 2 - 2025

Redriver Company has a 2.5% return on average assets of $500,000 and a net profit ratio of 10%.Redrivers's sales are closest to?

View Explanation

Log in for full answers

Similar Questions

A 公司的净收入为 273,165 美元，销售额为 2,399,874 美元。利润率是多少？ 如果答案是 10.4567%，则写 0.1046。

Company A has a net income of $273,165 and sales of $2,399,874. What is the profit margin? If the answer is 10.4567%, write 0.1046.

Company A has a net income of $286,590 and sales of $2,527,338. What is the profit margin? If the answer is 10.4567%, write 0.1046.

Company A has a net income of $231,917 and sales of $2,080,435. What is the profit margin? If the answer is 10.4567%, write 0.1046.

4.6: If a company’s net profit margin is 10% and its revenue is $600,000, what is the net profit?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

A 公司的净收入为 273,165 美元，销售额为 2,399,874 美元。利润率是多少？如果答案是 10.4567%，则写 0.1046。