Selected Information for Acme Corp -When Calculating Acme's Return on Net Operating Assets in Year

question 30

Multiple Choice

Selected information for Acme Corp.:
$\begin{array}{lrrr}&\text { Year } 1&\text { Year } 2&\text { Year } 3\\\text { Cash } & \$ 1,000 & \$ 1,500 & \$ 1,500 \\\text { Marketable securities } & 8,000 & 2,000 & 2,000 \\\text { Accounts receivable, net } & 2,000 & 3,000 & 2,500 \\\text { Other current assets } & 2,500 & 3,000 & 3,000 \\\text { Property, plant, and equipment } & 4,500 & 6,000 & 7,000 \\\text { Less: accumulated depreciation } & (4,000) & (4,200) & (4,400) \\\text { Goodwill and other intangibles } & 5,000 & 7,500 & 1,000\end{array}$
-When calculating Acme's return on net operating assets in Year 1, which of the following adjustments to the asset base is most appropriate to consider?

• A)Accumulated depreciation adjustment
• B)Intangible asset adjustment
• C)Non-operating asset adjustment
• D)No asset adjustment

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Definitions:

Total Asset Turnover

A ratio calculating how effectively a company utilizes its assets to produce sales income.

Return on Equity

A measure of a corporation's profitability, indicated by the amount of net income returned as a percentage of shareholders equity.

Return on Assets

A financial ratio indicating how efficiently a company uses its assets to generate profit.

Equity Multiplier

An equity multiplier is a financial ratio that measures the proportion of a company’s total assets financed by its shareholders' equity, demonstrating the degree of financial leverage being used.