$$\begin{array}{l}
\text { Rivaz Corporation }\
\begin{array} { l r }
& 2005 \
\text { Net Income } & \$ 3,000 \
\text { Dividends } & \$ 1,000 \
\text { Total Assets } - 12 / 31 / 05 & \$ 35,000 \
\text { Total Liabilities } - 12 / 31 / 05 & \$ 21,225 \
\text { Number of shares outstanding } & 1,000 \
\text { Cost of Equity } & 12 \%
\end{array}
\end{array}$$
-Assuming total assets grew by $5,000 from 2004 to 2005, what is the return on assets of Rivaz Corporation for 2005?
A)9.23%
B)8.57%
C)10.00%
D)6.15%

Question

$$\begin{array}{l}
\text { Rivaz Corporation }\
\begin{array} { l r } 
& 2005 \
\text { Net Income } & \$ 3,000 \
\text { Dividends } & \$ 1,000 \
\text { Total Assets } - 12 / 31 / 05 & \$ 35,000 \
\text { Total Liabilities } - 12 / 31 / 05 & \$ 21,225 \
\text { Number of shares outstanding } & 1,000 \
\text { Cost of Equity } & 12 \%
\end{array}
\end{array}$$
-Assuming total assets grew by $5,000 from 2004 to 2005, what is the return on assets of Rivaz Corporation for 2005?
A)9.23%
B)8.57%
C)10.00%
D)6.15%

Quizplus · Accepted Answer

Return on Assets = Net Income / Average Total AssetsAverage Total Assets = (Total Assets 12/31/05 + Total Assets 12/31/04) / 2Total Assets 12/31/04 = Total Assets 12/31/05 - Growth in Total AssetsTotal Assets 12/31/04 = $35,000 - $5,000 = $30,000Average Total Assets = ($35,000 + $30,000) / 2 = $32,500Return on Assets = $3,000 / $32,500 = 9.23%

-Assuming Total Assets Grew by $5,000 from 2004 to 2005