Question

speedy has net income of $37,955, and assets at the beginning of the year of $219,000. assets at the end of the year total $265,000. compute its return on assets.

Answer 1

To calculate the return on assets, divide the net income by the average total assets and express the result as a percentage.

Step-by-step explanation:

The return on assets (ROA) measures a company's profitability by determining how efficiently it utilizes its assets to generate income. To calculate the ROA, divide the net income by the average total assets. The average total assets can be calculated by adding the beginning and ending assets and dividing by 2.

ROA = (Net Income / Average Total Assets) x 100%

In this case, the net income of Speedy is $37,955. The beginning assets are $219,000, and the ending assets are $265,000. Therefore, the average total assets are ($219,000 + $265,000) / 2 = $242,000.

ROA = ($37,955 / $242,000) x 100% = 15.68%