A company has a return on assets of 8.7 percent and a return on equity of 14.6 percent. If the company has equity of $265,000, what are the company's total assets?

Question

Quizplus · Accepted Answer

The return on assets (ROA) is given by the formula ROA = Net Income / Total Assets, and the return on equity (ROE) is given by ROE = Net Income / Equity. Given that the ROE is 14.6% and the equity is $265,000, we can find the net income by rearranging the ROE formula: Net Income = ROE * Equity = 0.146 * $265,000 = $38,690. Using the ROA formula and rearranging it to find Total Assets, we get Total Assets = Net Income / ROA = $38,690 / 0.087 = $444,713.

A Company Has a Return on Assets of 8