Question

A company had net income of $2,690,000, net sales of $25,400,000, and average total assets of $8,800,000. Its return on total assets equals:

Options:
a. 30.57%
b. 34.65%
c. 10.59%
d. 327.14%
e. 3.27%

Answer 1

The return on total assets is calculated by dividing the net income by the average total assets and multiplying by 100. For the given figures, the return on total assets equals 30.57%.

Step-by-step explanation:

The return on total assets (ROTA) is calculated by dividing the net income by the average total assets and then multiplying the result by 100 to get a percentage. In this case, the net income is $2,690,000 and the average total assets are $8,800,000. The formula to calculate ROTA is:

Return on Total Assets = (Net Income / Average Total Assets) × 100

Plugging the numbers into the formula we have:

ROTA = ($2,690,000 / $8,800,000) × 100 = 30.57%

Therefore, the return on total assets equals 30.57%, which corresponds to option (a).