Calculate return on assets from the following information: Net income $1,800,000
Current Assets $350,000
Land and building $250,000
A) 1:1
B) 3:2
C) 4:1
D) 2:2
E) 3:1

Question

Quizplus · Accepted Answer

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

ROA = Net Income / Total Assets

Total assets = Current assets + Land and building = $350,000 + $250,000 = $600,000

Therefore,

ROA = $1,800,000 / $600,000 = 3

The ratio can be expressed as 3:1.

Hence, the best choice is (E) 3:1.

Calculate Return on Assets from the Following Information: Net Income