Zulu Corporation had total assets of $475 million.It had sales of $300; cost of goods sold of $225 million, and operating expenses of $35 million.Tax rate is 40%.Calculate the company's Return of Assets.
A)4.04%
B)5.05%
C)6.06%
D)7.07%

Question

Quizplus · Accepted Answer

Return on Assets (ROA) is calculated as Net Income divided by Total Assets. First, calculate Net Income: Sales ($300 million) - Cost of Goods Sold ($225 million) - Operating Expenses ($35 million) = Operating Income ($40 million). Then, calculate Net Income after tax: Operating Income ($40 million) * (1 - Tax Rate 0.40) = $24 million. Finally, ROA = Net Income ($24 million) / Total Assets ($475 million) = 0.0505 or 5.05%.

Zulu Corporation Had Total Assets of $475 Million