Tom’s electrical had the following information: total assets, december 31, 2016 $160,000 total assets, december 31, 2017 170,000 for year ended december 31, 2017: interest expense 2,000 net income 48,000 what is the rate of return on total assets?

ROA = 30.3030%

Explanation:

ROA = operating income / average assets

were average assets = ( beginning assets + ending assets ) / 2

operating income = net income + interest expense

= 48,000 + 2,000 = 50,000 income generate by assets

average assets = (160,000 + 170,000) / 2 = 165,000

ROA = 50,000 / 165,000  =   0.303030 = 30.3030%

Remember:

If you are given with the net income value and the list of expenses, look out for interest expenses, because those are generate by the liabilities ofthe company, so to clean up the income we add them to the net income to show the ammount generate by assets

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