Flingers Inc.reveals the following information in their annual report for FY 2014. What is Flingers' return on assets?
A) 16%
B) 20%
C) 25%
D) 40%

Question

Flingers Inc.reveals the following information in their annual report for FY 2014.  What is Flingers' return on assets?
A) 16% 
B) 20% 
C) 25% 
D) 40%

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing net income by total assets. From the given data, Flingers' net income is $1,000,000 and total assets are $4,000,000. Therefore, the ROA is:
ROA = net income/total assets = $1,000,000/$4,000,000 = 0.25
Multiplying by 100 to convert to a percentage, we get 25%. Therefore, the correct choice is C.