Question

Use the information in the table below to compute the ROA for the company. Enter your answer to 4 decimal places, for example 0.1234.

Average Assets	7,000,000
Average Debt	2,000,000
Sales	6,000,000
Net Income	249,009
Interest expense	10,000
Tax rate	24%

Answer 1

Return on Assets (ROA) for the Company

Return on Assets (ROA) = [Net Income + Interest Expenses(1 – Tax Rate)] / Average total assets

= [$249,009 + $10,000(1 – 0.24)] / $7,000,000

= [$249,009 + ($10,000 x 0.76)] / $7,000,000

= [$249,009 + $7,600] / $7,000,000

= $256,609 / $7,000,000

= 0.0367 or

= 3.67%

“Hence, the Return on Assets (ROA) for the Company will be 0.0367”