Accounting

What is the correct formula for finding the return on assets (ROA)?

ROA = Net Income / Total Assets

or

ROA = Net Profit / Average Total Assets

I'm getting conflicting information on whether I should take the sum of the assets or find the average of all the assets.

asked by Lyra
  1. I'm thinking the answer is:

    ROA = Annual Net Income / Average Total Assets

    Please correct me if I'm mistaken.

    posted by Lyra
  2. ROA = net income/total assets

    is your formula.

    posted by JW
  3. Average Total Assets are calculated in the equation if you have a balance sheet with a beginning balance of say 10,000 and an ending balance of 30,0000. You will add those two numbers then divide by 2. (10,000 + 30,000)/2

    So, if you have a net income of 50,000 then
    ROA = 50,000/((10,000 + 30,000)/2) = 250%

    posted by JW
  4. Thanks for your help, JW! I appreciate it.

    posted by Lyra

Respond to this Question

First Name

Your Response

Similar Questions

  1. Statistics

    Profitability remains a challenge for banks and thrifts with less than $2 billion of assets. The business problem facing a bank analyst relates to the factors that affect return on assets(ROA), an indicator of how profitable a
  2. Accounting

    Based on the following values, calculate the Return on Assets? Gross Income = $2.7M || Net Income = $1.8M || Net Assets = $900K || Current Assets = $450K I'm having a hard time with this and unsure of the formula to use. Can you
  3. Accounting

    When a corporation issues common stock what is the impact on the financial statements (assets, liabilities, stockholders' equity, and net income) and on the following financial ratios: Current ratio, ROA, and ROE?
  4. Math

    You have the following data for the Fosberg Winery. What is Fosberg's return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80; Profit margin = 4.5%; Tax rate = 35%.
  5. Accounting

    Moon Shoe Factory is an investment center and is responsible for all of their net income and the use of their assets. In 2012, the invested assets totaled $475,000 and net income was $115,000. What is the rate of return on assets?
  6. Personal Fiance

    Can someone check this and see if I am doing it right or not. Thank you. I used Bank of America annual report Earnings Assets to Total Assets Earnings Assets 2,736,000 Total Assets 2,223,299,000 1.23 Interest Margin to Average
  7. Accounting

    How can I calculate the net income if I only know the assets total and liabilities total from both the beginning of the year and the end of th eyear? Net income is related calculated using revenues less expenses. Assets and
  8. Finance

    The Rangoon Timber Company has the following ratios: Sales / Total assets 2.98; ROA 11.86%; ROE 14.35%. What are Rangoon’s profit margin and debt ratio?
  9. Accounting

    The ratio of __________ to __________ is an example of a __________ ratio. A. quick assets; current liabilities; leverage B. cost of goods sold; total assets; asset utilization C. net credit sales; average owner's equity; leverage
  10. Accounting

    The ratio of __________ to __________ is an example of a __________ ratio. A. quick assets; current liabilities; leverage B. cost of goods sold; total assets; asset utilization C. net credit sales; average owner's equity; leverage

More Similar Questions