If Randolph Co. has sales of $3,000,000, net income of $200,000, and total asset turnover of 1.5x, what is its return on assets (ROA)?
A) 10%
B) 17%
C) 14%
D) 6%

Question

Quizplus · Accepted Answer

ROA is calculated as Net Income divided by Total Assets. Given a total asset turnover of 1.5x and sales of $3,000,000, Total Assets = Sales / Asset Turnover = $3,000,000 / 1.5 = $2,000,000. Therefore, ROA = Net Income / Total Assets = $200,000 / $2,000,000 = 10%.