Answer :
The firm's return on assets (ROA) in 2019 was 45.82%, indicating efficient utilization of assets and strong profitability.
16. To calculate the return on assets (ROA), we can use the formula:
ROA = (Net Profit / Average Assets) * 100
Given that the firm's average assets were $3,982,683, net profit was $1,824,913, we can calculate the return on assets as follows:
ROA = ($1,824,913 / $3,982,683) * 100 = 45.82% (rounded to two decimal points)
The return on assets for the firm in 2019 is approximately 45.82%.
17. A return on assets (ROA) of 45.82% means that for every dollar of average assets the firm had in 2019, it generated a net profit of 45.82 cents.
This indicates the efficiency and profitability of the firm's asset utilization. A higher ROA indicates better performance in generating profits from the available assets. It can also suggest effective management and utilization of resources to generate returns.
However, it's important to compare ROA with industry benchmarks and consider other financial metrics to gain a comprehensive understanding of the firm's overall financial health and performance.
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The complete question is:
16. In 2019, the firm's average assets were $3982683.
Given the firm's sales of $11776310 and net profit of $1824913,
calculate return on assets in percent (round to two decimal
points).
17. The firm's return on assets (ROA) in 2019 was 45.82%. What does this mean?
