Question

A company reports the following income statement and balance sheet information for the current year: Net income $250,000 Interest expense 100,000 Average total assets 2,500,000 Determine the return on total assets. Round percentage to one decimal place.

Answer 1

Answer:

The return on total assets or ROA is 0.1

Explanation:

The return on total assets or ROA is calculated this way:

Net income / Average total assets

In this case:

Net income =$250,000 and  Average total assets =  $2,500,000

$250,000 / $2,500,000 = 0.1

The ROA is a ratio to calculate if the investment in assets made by the company is generating enough income.