Question

"Tom's Tool Factory is an investment center and is responsible for all of its net income and the use of its assets. This year, the invested assets totaled $475,000, and net income was $275,000. What is the rate of return on assets?"
A.57.9%
B. 172.3%
C. 5.0%
D. 115.0%

Answer 1

Answer:

A.57.9%

Explanation:

Return on Assets (ROA) measures how effective a business generates income from its total assets. It is calculated from the net income and total assets using the following formula;

Return on assets (ROA ) = Net income / Total assets

Net income = 275,000

Total assets = 475,000

ROA = 275,000 / 475,000

= 0.5789 or 57.9%