Last year Mocha Java, Inc. had an ROA of 10 percent, a profit margin of 5 percent, and sales of $25 million. What is Mocha Java's total assets?
A) $0.125m.
B) $1.25m.
C) $12.5m.
D) $12m.

Question

Quizplus · Accepted Answer

ROA (Return on Assets) is calculated as Net Income / Total Assets. Given an ROA of 10% and a profit margin of 5% on sales of $25 million, we first calculate Net Income = 5% of $25m = $1.25m. Using the ROA formula, 10% = $1.25m / Total Assets, solving for Total Assets gives us $12.5m.

Last Year Mocha Java, Inc