In 2020, Elephant Corporation's financial statements included the following information: Net income.............................................$19,000
Sales........................................................98,000
Total assets, beginning of year................85,000
Total asseets, end of the year....................112,000
Inventory.....................................................70,000
To one decimal, Elephant's return on assets (ROA) for 2020 was
A) 21.0%.
B) 19.3%.
C) 17.2%.
D) 0.99%.

Question

In 2020, Elephant Corporation's financial statements included the following information: Net income.............................................$19,000
Sales........................................................98,000
Total assets, beginning of year................85,000
Total asseets, end of the year....................112,000
Inventory.....................................................70,000
 To one decimal, Elephant's return on assets (ROA) for 2020 was
A) 21.0%.
B) 19.3%.
C) 17.2%.
D) 0.99%.

Quizplus · Accepted Answer

Return on assets (ROA) is calculated as net income divided by average total assets. 
Average total assets can be calculated as (beginning total assets + ending total assets)/2, which is (85,000 + 112,000)/2 = 98,500.

ROA = Net income / Average total assets
ROA = 19,000 / 98,500 = 0.193 = 19.3% (rounded to one decimal)

Therefore, the answer is B, 19.3%.

In 2020, Elephant Corporation's Financial Statements Included the Following Information