Answer:
The return on assets will be:
2.22%
Explanation:
Sales = $1,000,000
Net profits after taxes of $50,000
(financial) Leverage of 2.0
Total equity of $750,000
Leverage = Total Debt/Stockholders' equity
2.0 = Total Debt/$750,000
Total Debt = $750,000 * 2.0
= $1,500,000
Assets = Total Debt + Stockholders' equity
Assets = $1,500,000 + $750,000
Assets = $2,250,000
Therefore, Return on Assets = Net Income (EAT)/Assets * 100
= $50,000/$2,250,000 * 100
= 2.22%
