Question

Finally, Calculate the Return on Assets (ROA) for each firm and enter the values in B37, C37, D37, and E37 (ROA is defined as the ratio of Net Income to Assets). Format values with a % sign. Why might a manager care about ROA?

Answer 1

Answer is provided in the explanation section

Step-by-step explanation:

Return on assets (ROA) is a ratio of profit that gives insights to the manager how much profit the company earns from its assets. ROA measures the efficiency of the company in generating a profit by using human resources or assets. The higher number of ROA shows the efficient performance of the company is in generating profits and managing the balance sheets.

Formula: Return on Assets = Net Income / Total Assets

EXCEL: If you have the balance sheet and income statement of each firm then you can calculate ROA in excel:

• Take the value of net profit after tax from the income Statement of each firm.

• Take the value of Total Assets from the balance sheet of each firm.

• Divide net profit value with total assets value and get ROA value of each firm.

• Applying the above formula of ROA value for each firm on B37, C37, D37, and E37 cells and place % symbols after value.