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, assets of $300 million, current liabilities of $50 million and shareholders’ equity of $120 million. Calculate return on assets?

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BlackTom AI · Accepted Answer

The task asks to calculate return on assets (ROA) for Venus Limited using the provided figures.
First, recall the formula for ROA: ROA = Net Income / Total Assets.
From the data: Net income = 21 million, Total assets = 300 million.
Compute the ratio: 21 / 300 = 0.07, which equals 7% as a percentage.
This aligns with standard ROA interpretation: how effectively a company uses its assets to generate net income.
Note that ROA focuses on profitability relative to asset base, not on equity or liabilities, so using assets (not equity) is key here.
Since the only available option is 7.00%, there isn't an alternative choice to compare, but the calculation above confirms why 7.00% is the correct expression of ROA for these inputs.

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