Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

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Multiple Choice

A company has income before taxes of $100,000. Net sales are $400,000 and gross profit is $300,000. What is the ROA, assuming the company has a 40% tax rate, and average total assets were $900,000?

6.7%

11.1%

33.3%

44.4%

Verified step by step guidance

Calculate the tax expense by multiplying the income before taxes ($100,000) by the tax rate (40%).

Subtract the tax expense from the income before taxes to determine the net income.

Understand that Return on Assets (ROA) is calculated by dividing net income by average total assets.

Use the net income calculated in step 2 and divide it by the average total assets ($900,000) to find the ROA.

Convert the ROA into a percentage by multiplying the result by 100 to compare with the given options.

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