Calculate return on assets from the following information: Net income $1,800,000
Return on equity 25%
Current Assets $350,000
Land and building $250,000
Sales $1,500,000
A)1:1
B)3:2
C)4:1
D)2:2
E)3:1

Question

Quizplus · Accepted Answer

Return on Assets (ROA) = Net Income / Total Assets

First, we need to find the total assets:

Total Assets = Current Assets + Land and Building

Total Assets = $350,000 + $250,000

Total Assets = $600,000

Now, we can calculate ROA:

ROA = $1,800,000 / $600,000

ROA = 3

The ROA is 3, which means for every $1 of assets the company generates $3 of net income. The closest option is 3:1 or answer E.

Calculate Return on Assets from the Following Information: Net Income