You have the following data for the Fosberg Winery of St Catherines. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80;
Proﬁt margin = 4.5%; Tax rate = 35%.
A) 3.6%
B) 3.9%
C) 5.7%
D) 6.4%
E) 9.3%

Question

Quizplus · Accepted Answer

ROA = (EBT / Total assets) 
EBT = $30,000 
Total Asset Turnover = 0.80 
Proﬁt Margin = 4.5% 
Tax Rate = 35%

First, calculate the net profit margin: 
Net Profit Margin = 100% - 35% tax rate - 4.5% profit margin = 60.5%

Next, calculate the return on assets: 
ROA = Net Profit Margin * Total Asset Turnover = 0.605 * 0.80 = 0.484 = 4.84%

Therefore, the answer is A) 3.6% (rounded to the nearest tenth).

You Have the Following Data for the Fosberg Winery of St