Given the following financial data: net income/sales = 6%; sales/total assets = 3.5; debt/total assets = 30%.The return on total assets is:

Question

Quizplus · Accepted Answer

Return on Total Assets (ROA) can be calculated using the following formula:

ROA = Net Income / Total Assets

Given:

Net Income / Sales = 6%

Sales / Total Assets = 3.5

Debt / Total Assets = 30%

We can use the information provided to calculate Total Assets as follows:

Sales / Total Assets = 3.5

Total Assets = Sales / 3.5

We can use the above formula to calculate ROA:

Net Income / Total Assets = (Net Income / Sales) * (Sales / Total Assets)
 
Net Income / Total Assets = (6% * 3.5)

Net Income / Total Assets = 21%

Therefore, the answer is B) 21%.

Given the Following Financial Data: Net Income/sales = 6%; Sales/total