The balance sheets at the end of each of the first two years of operations indicate the following: Kellman Company Year 2 Year 1 Total current assets $627,453 $584,269 Total investments 67,475 54,298 Total property, plant, and equipment 866,358 676,683 Total current liabilities 107,059 87,515 Total long-term liabilities 320,288 232,231 Preferred 9% stock, $100 par 90,729 90,729 Common stock, $10 par 526,846 526,846 Paid-in capital in excess of par-common stock 67,097 67,097 Retained earnings 449,267 310,832 Using the balance sheets for Kellman Company, if net income is $108,820 and interest expense is $45,344 for Year 2, what is the return on total assets for the year (round percent to two decimal points)

Return on total assets is a financial tool that shows how well firm investments generate value which shows the productivity level of such a firm.

The formula for

[tex]\rm\, Return \,on \,total \,assets = \dfrac{Net \,Income}{Total Assets}[/tex]

Return on total assets =

[tex]\rm\, = \dfrac {Net Income}{(Total current assets + Total investments + Total property, plant, and equipment)}[/tex]

[tex]\rm\,Return\, on \, Total\, Assets = $108,820 / ($627,453 + $67,475 +$ 866,358)\\\\\rm\,Return\, on \, Total\, Assets $108,820 / $1,561,286\\\\\rm\,Return\, on \, Total\, Assets = 0.0696989533\\\\\rm\,Return\, on \, Total\, Assets = 6.96989533\%\\\\[/tex]

Hence, the return on total assets is equal to 6.97%.

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