The Following Information Pertains to Cheng Company What Is the Return on Assets for Cheng?
A) 6

question 235

Multiple Choice

The following information pertains to Cheng Company. Assume that all statement of financial position amounts represent both average and ending balance figures. Assume that all sales were on credit. All amounts are in thousands except per share items. $\begin{array}{lr}\text { Assets }\\\text { Property, plant and equipment } &¥ 215,000 \\\text { Inventory } & 25,000 \\\text { Accounts receivable (net) } & 30,000 \\\text { Cash and short-term investments } & 40,000 \\\quad \text { Total Assets } &¥ 310,000\\\\\text { Equity and Liabilities }\\\text { Shareholders' equity-ordinary } & ¥155,000 \\\text { Non-current liabilities } & 95,000 \\\text { Current liabilities } & 60,000 \\\quad \text { Total Equity and Liabilities } & ¥ 310,000\end{array}$ $\begin{array}{lr}\text { Income Statement }\\\text { Sales revenue } & ¥ 90,000 \\\text { Cost of goods sold } & 45,000 \\\text { Gross margin } & 45,000 \\\text { Operating expenses } & 20,000 \\\text { Net income } & ¥ 25,000\\\\\text { Number of ordinary shares } & 6,000 \\\text { Market price of ordinary shares } & \$ 20 \\\text { Dividends per share } & 1.00\end{array}$ What is the return on assets for Cheng?

• A) 6.8%
• B) 10.5%
• C) 8.1%
• D) 16.1%

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Definitions:

Liabilities Section

Part of a balance sheet that reports obligations the company owes to outside parties, including debts, loans, and other financial obligations.

Effective Interest Method

A technique used in accounting to allocate the interest expense or income over the life of a financial instrument such as a bond or a loan.

Bond Premium

The amount by which the market price of a bond exceeds its face value, often because it offers an interest rate higher than the current market rates.

Callable Bond

A type of bond that gives the issuer the right to repay the bond before its maturity date at a predetermined call price.