Question

Ski-Doo Company manufactures, markets, and sells snowmobiles and snowmobile equipment and accessories. The average total assets for Ski-Doo is \(3,000,000. In its most recent year, Ski-Doo reported net income of \)201,000 on revenues of $1,400,000.

Required 1. What is Ski-Doo Company’s return on assets?

Short answer

The return on assets of Ski-Doo Company is 6.7%.

Step-by-step solution

Definition of Return on Assets

The return on assets is defined as the profitability ratio which shows how much the business is profitable in relation to the total assets of the business.

Computation of return on assets

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{Assets}& =& \frac{\mathrm{Net}\mathrm{Income}}{\mathrm{Average}\mathrm{assets}}\times 100\\ & =& \frac{201,000}{3,000,000}\times 100\\ & =& 6.7\%\end{array}$