Here is some recent information for a popular online beauty shop.

Calculate return on assets for 2025.

2024 2025
Gross profit 59,000 65,000
Profit before tax 200 2,800
Net profit after tax 214 2,453
Accounts payable 20,600 20,710
Total assets 63,002 70,959

Show your answer as a percentage rounded to one decimal place. Do the rounding at the end of all the calculating.

Question

Here is some recent information for a popular online beauty shop.

Calculate return on assets for 2025.

2024	2025
Gross profit	59,000	65,000
Profit before tax	200	2,800
Net profit after tax	214	2,453
Accounts payable	20,600	20,710
Total assets	63,002	70,959

Show your answer as a percentage rounded to one decimal place. Do the rounding at the end of all the calculating.

BlackTom AI · Accepted Answer

The task asks to calculate return on assets (ROA) for 2025 and present the answer as a percentage to one decimal place, rounding at the end of all calculations.

First, restate the data provided for clarity:
- 2024 total assets: 63,002
- 2025 total assets: 70,959
- 2025 net profit after tax: 2,453

There are two common ways to compute ROA.

Option A: Use average assets for the period
- Compute average assets = (Asset at start of period + Asset at end of period) / 2
- Average assets = (63,002 + 70,959) / 2 = 133,961 / 2 = 66,980.5
- ROA = Net income / Average assets = 2,453 / 66,980.5 ≈ 0.03660
- Convert to percentage: 0.03660 × 100 ≈ 3.660%
- After rounding to one decimal place: 3.7%

Option B: Use ending assets (common in some quick checks or different conventions)
- ROA = Net income / Ending assets = 2,453 / 70,959 ≈ 0.03456
- Convert to percentage: 0.03456 × 100 ≈ 3.456%
- After rounding to one decimal place: 3.5%

Now, compare the two approaches:
- The average-assets method (Option A) generally provides a smoother, more representative measure of how profits relate to the asset base throughout the period, especially when asset levels change.
- The ending-assets method (Option B) gives a snapshot tied to the year-end asset level and can yield a slightly different figure, often smaller if assets grew during the year.

Important considerations:
- The problem statement says to round at the end of all calculating, so ensure all intermediate arithmetic is exact before applying the final rounding.
- If the course or exam specifies ROA as Net income divided by average assets, then Option A’s 3.7% would be the conventionally correct result.
- If the course specifies a different convention (ROA as Net income divided by ending assets), then Option B’s 3.5% would be used.

In practice, you can document both approaches so the method is clear, but always align with the instruction or rubric given by the instructor for which convention to apply.

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