Question

Cruz Company had revenues of $80,175 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.

Answer 1

Based on the amount of revenues and expenses as well as assets, the return on assets is 7.1%.

To find the ROA you need to find the average assets and the net income.

What was the net income ?

This was:

= Revenues - Expenses

= 80,175 - 50,000

= $30,175

What were the Average Assets?

= (Beginning assets + Ending assets) / 2

= (400,000 + 450,000) / 2

= $425,000

What was the Average Return on Assets?

= Net income / Average assets

= 30,175 / 425,000

= 7.1%

In conclusion, it was 7.1%.

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