If the company has a return on assets ratio of 25% and net income is $750,000, then the total asset balance is 3,000,000.
The asset turnover ratio assesses the efficiency with which a company's assets generate revenue or sales. It computes an annualized percentage by comparing the dollar amount of sales (revenues) to total assets. Divide net sales or revenue by the average total assets to calculate the asset turnover ratio.
Divide a company's earnings after tax by its total assets to calculate the return on total assets ratio. Total assets are the sum of the company's debt and shareholders' equity. The company's balance sheet contains this amount.
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