Price Printing Co. had sales of $10 million, operating income of $3 million, after-tax income of $1 million, assets of $8 million, stockholders' equity of $5 million, and a total debt of $4 million. What is Price Printing Company's return on assets?
A)37.5%
B)12.5%
C)30.0%
D)25.0%
E)20.0%

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing the after-tax income by the total assets:

ROA = After-tax income / Total assets

In this case, the after-tax income is $1 million and the total assets are $8 million, so

ROA = $1 million / $8 million = 0.125 or 12.5%

Therefore, the answer is B) 12.5%.