The management of Pasama Inc.is evaluating the three segments of the company.Given the data below,which of the following statements is true regarding segment return on assets?
A)Segment Africa has the highest operating income and the highest return on assets.
B)Segment Belgium has the highest operating income and the highest return on assets.
C)Segment Canada has the highest operating income and the highest return on assets.
D)Segment Canada has the highest return on assets and Segment Africa has the lowest return on assets.
E)Segment Belgium has a higher return on assets than Segment Canada.

Question

The management of Pasama Inc.is evaluating the three segments of the company.Given the data below,which of the following statements is true regarding segment return on assets? 
A)Segment Africa has the highest operating income and the highest return on assets. 
B)Segment Belgium has the highest operating income and the highest return on assets. 
C)Segment Canada has the highest operating income and the highest return on assets. 
D)Segment Canada has the highest return on assets and Segment Africa has the lowest return on assets. 
E)Segment Belgium has a higher return on assets than Segment Canada.

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing operating income by total assets.

ROA for Segment Africa = 20,000/400,000 = 5%
ROA for Segment Belgium = 50,000/1,000,000 = 5%
ROA for Segment Canada = 45,000/900,000 = 5%

Therefore, all three segments have the same ROA of 5%. However, Segment Canada has the highest return on assets (5%) and Segment Africa has the lowest return on assets (5%). So, option D is the correct answer.

The Management of Pasama Inc