Given the following information for Victory Stables calculate their return on assets, return on ...

Return on Assets
   $50,000 + $8,500 = $58,500
   ($62,000 + $300,000 + $82,000 + $350,000)/2 = $397,000
   $58,500/$397,000 = 14.7%

Return on Equity
   $50,000 - $2,500 = $47,500
   ($125,000+225,000)/2 = $175,000
   $47,500/$175,000 = 27.1%

The rate of return on assets is used as a standard profitability measure that shows the company's success in using its assets to generate income. It helps investors compare one company to another, especially within the same industry.

The rate of return on equity is used as a standard profitability measure which shows the relationship between net income and average common shareholders' equity. The higher the rate of return, the more successful the company.