Question

Omni Technology Holding Company has the following three affiliates:

	Software	Personal Computers	Foreign Operations
Sales	\(40,200,000	\)60,080,000	$100,680,000
Net Income (after tax)	2,086,000	2,880,000	8,510,000
Assets	5,820,000	25,790,000	60,630,000
Stockholder’s equity	4,090,000	10,170,000	50,950,000

f. Returning to question b, explain why the software affiliate has the highest return on total assets.

Short answer

The software affiliate has the highest return on total assets. It is so because the software earns a high return with fewer assets. The total assets of the software are much lower in comparison to the personal computer and foreign operations.

Step-by-step solution

Return on total assets

Return on assets of the company is computed by dividing the net income with the total assets of the company.

Comparison of return on total assets

Name of Affiliates	Return on total assets
Software	35.84%
Personal computers	11.17%
Foreign operations	14.04%

The software affiliate has the highest return on total asset because of the high difference in the value of the total assets and low difference in net income of the affiliates.