Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The return on assets for National Textile is
A)30 percent.
B)150 percent.
C)33-1/3 percent.
D)24 percent.

Question

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The return on assets for National Textile is
A)30 percent. 
B)150 percent. 
C)33-1/3 percent. 
D)24 percent.

Quizplus · Accepted Answer

Return on assets (ROA) = Net income / Average total assets
Net income = $540,000
Average total assets = ($1,850,000 + $1,300,000) / 2 = $1,575,000
ROA = $540,000 / $1,575,000 = 34.28%
Therefore, the closest option is D) 24 percent, which is the closest to 34.28%.

Use This Balance Sheet and Income Statement to Answer the Following