Question

For the year ended December 31, 2014, Akito Co. has net sales of $1,000,000 and profit of $290,000. Total assets on January 1, 2014 were $1,750,000 and total assets at December 31, 2014 are $1,245,000. Akito's return on assets for 2014 is: _______

a. 19.4%.
b. 23.3%.
c. 66.8%.
d. 80.3%.

Answer 1

The Return on Assets (ROA) for Akito Co. is calculated by dividing the net profit by the average total assets for the year. Akito Co.'s ROA for the year ended December 31, 2014, is 19.4%, which is obtained by dividing $290,000 by the average total assets of $1,497,500.

Step-by-step explanation:

The question focuses on calculating the Return on Assets (ROA) for Akito Co. for the year ended December 31, 2014. ROA is a profitability ratio that measures how efficiently a company uses its assets to generate profit. The formula to calculate ROA is Net Income divided by Average Total Assets. The Average Total Assets is determined by taking the sum of the assets at the beginning and at the end of the year and dividing by two (Total Assets at the beginning + Total Assets at the end / 2).

To find Akito Co.'s ROA, we first calculate the Average Total Assets: ($1,750,000 + $1,245,000) / 2 = $1,497,500. Next, we divide the profit by the Average Total Assets: $290,000 / $1,497,500 = 0.1937 or 19.4%. Thus, the correct answer is a. 19.4%.