In 2019, Venus Limited has net income of $21 million, earnings before tax of $30 million, earnings before interest and tax of $38 million, gross profit of $55 million, sales of $200 million, average assets of $300 million, and average shareholders’ equity of $120 million in 2019. Calculate return on assets in 2019 ?

Question

In 2019, Venus Limited has net income of $21 million, earnings before tax of $30 million, earnings before interest and tax of $38 million, gross profit of $55 million, sales of $200 million,  average assets of $300 million, and average shareholders’ equity of $120 million in 2019. Calculate return on assets in 2019 ?

BlackTom AI · Accepted Answer

To determine return on assets (ROA), we use the formula ROA = net income / average assets. Here, net income is 21 million dollars and average assets are 300 million dollars.

Option A: 15.20%. If ROA were 15.20%, the implied net income would be 0.1520 × 300 = 45.6 million. This does not match the given net income of 21 million, so this option is incorrect.

Option B: 10.50%. If ROA were 10.50%, the implied net income would be 0.105 × 300 = 31.5 million. This is higher than the reported 21 million, so this option is incorrect.

Option C: 7.00%. If ROA were 7.00%, the implied net income would be 0.07 × 300 = 21 million, which exactly matches the provided net income figure. This option is consistent with the data.

Option D: 17.50%. If ROA were 17.50%, the implied net income would be 0.175 × 300 = 52.5 million. This is far from the stated net income, so this option is incorrect.

Therefore, the only choice that aligns with net income and average assets provided is 7.00%.

BFIL001 Week 8 Practice Quiz

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