Question

Borland, Inc., has a profit margin of 5.6 percent on sales of $13.6 million. If the firm has debt of $6.4 million and total assets of $9.8 million, what is the firm’s ROA?

Answer 1

ROA = 7.77 percent

Explanation:

Borland, Inc., has a profit margin of 5.6 percent on sales of $13.6 million

Thus, profit = 5.6% of $13.6 million

profit = 5.6 / 100 * $13.6 million = $0.7616 million

Profit is same as net income

Formula for ROA (return on asset) = net income/ total asset

total asset as given = $9.8 million

Thus, ROA = $0.7616/ $9.8 = 0.0777

ROA in percentage = 0.0777*100 = 7.77

Thus, ROA is 7.77 percent .