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.
D) Cannot be determined with the data provided.

Question

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.
D)	Cannot be determined with the data provided.

Quizplus · Accepted Answer

To calculate cash return on assets, we need to divide net cash flows from operating activities by average total assets. The average total assets for Tech Track are [(400,000 + 500,000)/2] = $450,000.

Cash return on assets = Net cash flows from operating activities / Average total assets
= 50,000 / 450,000
= 0.1111 or 11.11%

The cash return on assets for Tech Track is higher than the industry average of 10%, which means Tech Track's management is utilizing its assets more effectively to generate cash from operating activities. Therefore, the answer is better.

The Balance Sheet of Tech Track Reports Total Assets of $400,000