Question 1 - A company reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets. By the end of the year, assets had increased to $300,000.
1. Calculate the return on assets.
2. What does the return on assets ratio measure?
3. Comment about this company's assets ratio.
Question 2 - A company had total assets of $350,000 and total liabilities of $101,500 and total equity of $248,500.
1. Calculate its debt ratio.
2. What does the debt ratio reveal about a company?
3. Does a higher or lower ratio indicate greater risk?
4. Comment about this company's debt ratio.