Brachlan Company's net income last year was $80,000 and its interest expense was $20,000.Total assets at the beginning of the year were $660,000 and total assets at the end of the year were $620,000.The company's income tax rate was 30%.The company's return on total assets for the year was closest to:
A) 12.5%.
B) 13.4%.
C) 14.7%.
D) 15.6%.

Question

Quizplus · Accepted Answer

Return on total assets (ROA) is calculated as (Net Income + Interest Expense * (1 - Tax Rate)) / Average Total Assets. Here, ROA = ($80,000 + $20,000 * (1 - 0.30)) / (($660,000 + $620,000) / 2) = $94,000 / $640,000 = 14.7%.

Brachlan Company's Net Income Last Year Was $80,000 and Its