The Lasorda Company Provided the Following Information The Operating Income Before Depreciation During Each of the Three

question 112

Essay

The Lasorda Company provided the following information: $\begin{array} { l } \text { Cost of machine}&\$300,000 \\ \text {Life in years }&\text {3 YEARS } \\ \text {Residual value }& \text {zero }\\ \text { Depreciation method}& \text { stright-line}\\\end{array}$
The operating income before depreciation during each of the three years the machine was in use was $150,000.
a. Compute the rate of return on the average investment for each of the three years using the net book value.
b. Compute the rate of return on the average investment for each of the three years using the gross book value.

---

Definitions:

Ratios

Quantitative measurements that show the relationship between two numerical values or financial figures, often used to analyze companies' financial health.

Treasury Stock

Shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Return On Equity

A measure of a corporation's profitability, indicating how much profit is generated with the money shareholders have invested.

Return On Assets Ratio

A financial metric used to evaluate a company's efficiency in generating profits from its assets, calculated by dividing net income by total assets.