Question

Given these facts, calculate return on assets:

Sales $8,200,000
Net income 3,050,000
Average total assets 7,100,000
Average total liabilities 3,500,000
-22%.
-43%.
-85%.
-87%.
-Not enough information is given.

Answer 1

The return on assets (ROA) is calculated by dividing the net income by the average total assets. With a net income of $3,050,000 and average total assets of $7,100,000, the ROA is 42.96%, which rounds to 43%.

Step-by-step explanation:

To calculate the return on assets (ROA), divide the net income by the average total assets. ROA is a measure of how effectively a company is using its assets to generate earnings. Based on the given information, the net income is $3,050,000 and the average total assets are $7,100,000. Thus, the ROA can be calculated as follows:

ROA = Net Income ÷ Average Total Assets = $3,050,000 ÷ $7,100,000 = 0.4296 or 42.96%.

Therefore, the return on assets is 42.96%, which can be rounded to 43% when expressed as a percentage.