Last year Café Creations, Inc. had an ROA of 25 percent, a profit margin of 12 percent, and sales of $4 million. What is Café Creations' total assets?

Question

Quizplus · Accepted Answer

ROA (Return on Assets) is calculated as Net Income / Total Assets. Given an ROA of 25%, and knowing that Profit Margin is Net Income / Sales, we can find Net Income as 12% of $4 million = $0.48 million. Using the ROA formula, 25% = $0.48m / Total Assets, solving for Total Assets gives us $1.92 million.

Last Year Café Creations, Inc