Multiple Choice
XYZ Company had net sales during the period of $380,000 and net income of $60,000. If total assets were $480,000 at the beginning of the period and $720,000 at the end of the period, what is the company's ROA?
14. Financial Statement Analysis
Ratios: Return on Assets (ROA)
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A company has income before taxes of $100,000. Net sales are $400,000 and gross profit is $300,000. What is the ROA, assuming the company has a 40% tax rate, and average total assets were $900,000?
A
6.7%
B
11.1%
C
33.3%
D
44.4%
Verified step by step guidance1
Calculate the tax expense by multiplying the income before taxes ($100,000) by the tax rate (40%).
Subtract the tax expense from the income before taxes to determine the net income.
Understand that Return on Assets (ROA) is calculated by dividing net income by average total assets.
Use the net income calculated in step 2 and divide it by the average total assets ($900,000) to find the ROA.
Convert the ROA into a percentage by multiplying the result by 100 to compare with the given options.
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