Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The return on assets for National Textile is
A)30 percent.
B)150 percent.
C)33-1/3 percent.
D)24 percent.

Question

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. 
 
-The return on assets for National Textile is
A)30 percent. 
B)150 percent. 
C)33-1/3 percent. 
D)24 percent.

Quizplus · Accepted Answer

The formula for Return on Assets (ROA) is net income divided by average total assets. Using the ending balances from the balance sheet, we find that the average total assets are (18,000 + 21,000) / 2 = 19,500. Using the income statement, we find that the net income is 4,680. Therefore, ROA = 4,680 / 19,500 = 0.24 or 24%. Therefore, the correct answer is (D).

Use This Balance Sheet and Income Statement to Answer the Following