Flitter reported net income of $17,500 for the past year.At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities.By the end of the year,assets had increased to $300,000 and liabilities were $75,000.Calculate its return on assets:
A)8.8%
B)7.0%
C)5.8%
D)35.0%
E)23.3%

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated as Net Income divided by Average Total Assets. Average Total Assets = (Beginning Assets + Ending Assets) / 2 = ($200,000 + $300,000) / 2 = $250,000. ROA = $17,500 / $250,000 = 0.07 or 7.0%.

Flitter Reported Net Income of $17,500 for the Past Year