[Asja]

Hello…I’m confused…what is this return on total assets ratio and why have I not heard of it before? I’m confused about the whole adding back tax adjusted interest expense too…and why is this not on the ratio cheat sheet that will supposedly be provided on the exam?

Question: calculate ratios using the info below, including this “out of the blue” one that we never mentioned before:

Income Statement
Sales $3,800
Cost of goods sold (1,700)
Gross margin 2,100
Operating expenses (1,400)
Interest expense (100)
Income before tax 600
Income tax expense (180)
Net income $ 420

Answer:

Return on total assets = (net income + after-tax interest expense)/average total assets = [420 + .70(100)]/.5(2,400 + 2,800) = 0.19 The tax rate is .30 = (income tax expense)/(income before tax)= 180/600

By the way, this is from Wiley

[bhunt815]

What is this ratio cheat sheet of which you speak? I do not recall such a sheet being provided…

FAR 04/11/2016 - 84
AUD 05/12/2016 - 79
BEC 07/06/2016 - 81
REG 08/29/2016

[chandler]

There is no cheat sheet provided on the exam. Not sure where you heard that, but it's not a thing. Sometimes, the formulas are given in questions, but you need to know what they are.

[Asja]

Oh really? I guess I understood it as a “Cheat sheet”, since that is what they are doing in Wiley practice TBS,
maybe she meant that they will give you the ratio formulas…I guess not all of them…Bummer…I don't stand a chance…I'm like a pea at the bottom of a mountain.

[Puppykoala]

Formulas are 9 out of 10 times not given. You really need to memorize all the necessary ones.

[Author]

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