A company reports the following income statement and balance sheet information for the current year:

Question

Line Item Description Amount
Net income $309,400
Interest expense 54,600
Average total assets 2,600,000
Determine the return on total assets. If required, round the answer to one decimal place.

Answer 1

To determine the return on total assets (ROA), we can use the following formula:

\[ \text{ROA} = \frac{\text{Net Income}}{\text{Average Total Assets}} \]

Given the data:

• Net Income = $309,400
• Average Total Assets = $2,600,000

Now we can calculate the ROA:

\[ \text{ROA} = \frac{309,400}{2,600,000} \]

Calculating this gives:

\[ \text{ROA} = 0.119 \]

To express this as a percentage, we multiply by 100:

\[ \text{ROA} = 0.119 \times 100 = 11.9% \]

Rounding to one decimal place, the return on total assets is:

\[ \text{ROA} = 11.9% \]

So, the return on total assets is 11.9%.