Compute return on assets at year-end

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Question - In January 2007, the Status Quo Company was formed. Total assets were $552,000, of which $361,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $36,100 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $40,000 per year for each of the last 10 years. Other assets have not changed since 2007.

a. Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016. (Use $40,000 in the numerator for each year.) (Input your answers as a percent rounded to 2 decimal places.)

b. To what do you attribute the phenomenon shown in part a?

- Increase in market share   

- Increase in current assets   

- Annual depreciation charges  

c. Now assume income increased by 10 percent each year. What effect would this have on your answers to part a?

Reference no: EM132866486

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