Assume All Assets Are Operating Assets; All Current Liabilities Are

question 7

Multiple Choice

$$\begin{array} { l r r } & \underline { 2006 } & \underline { 2005 } \\\text { Current assets } & \$ 4,650 & \$ 4,730 \\\text { Long-term assets } & 7,120 & 6,450 \\\text { Current liabilities } & 1,440 & 1,340 \\\text { Long-term debt } & 3,830 & 3,760 \\\text { Common equity } & 6,500 & 6,080 \\& & \\\text { Operating income } & 2,140 & \\\text { Interest expense } & 240 & \\\text { Tax expense } ( 40 \% ) & 760 & \\\text { Net income } & 1,140 &\end{array}$$
Assume all assets are operating assets; all current liabilities are operating liabilities.
-Return on net operating assets for 2006 is:

• A)11.30%.
• B)12.03%.
• C)9.93%.
• D)11.19%.

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Definitions:

Required Rate of Return

The minimal annual revenue percentage that stimulates individuals or companies to direct their funds into a particular security or undertaking.

Borrow

To take or receive something with the intention of returning it, often referring to money with an obligation to pay back the original amount plus interest.

Yearly Payments

Recurrent payments made over the span of a year, often associated with loans, leases, or annuities.

Future Value

The estimated amount of money an investment is expected to be worth in the future, taking into account a specific rate of growth or interest.