Concept #1: Ratios: Return on Assets (ROA)

Practice: XYZ Company had net sales during the period of $380,000 and net income of $60,000. If total assets were $480,000 at the beginning of the period and $720,000 at the end of the period, what is the company’s ROA?

Practice: A company has income before taxes of $100,000. Net sales are $400,000 and gross profit is $300,000. What is the ROA, assuming the company has a 40% tax rate, and average total assets were $900,000?

The following information is available for Manhattan Quarry for the current year. The return on assets (ROA) for Manhattan Quarry is:
a. 26.7%
b. 32.6%
c. 42.4%
d. 29.6%

The following information is available for Manhattan Quarry for the current year:
Net income: $200,000
Interest expense: 20,000
Beginning of year: Total assets: 600,000 , Total common stockholders' equity: 400,000
End of year: Total assets: 750,000, Total common stockholders' equity: 450,000
The return on assets (ROA) for Manhattan Quarry is:
a. 26.7%
b. 32.6%
c. 42.4%
d. 51.8%

Which of the following equations can be used to measure the return on assets (ROA)?
A) Net Income/Average Total Assets
B) Net Profit Margin x Asset Turnover
C) (Net Income/Net Sales) x (Net Sales/Average Total Assets)
D) All of the above.

Consider the following financial data for Steve’s Computer Stores:
Calculate Steve’s return on assets (ROA).
a. 4.13%
b. 6.58%
c. 2.88%
d. 5.23%
e. 18.29%