Question

Asset GBP


Budgeted profits for the year 10,575,000


Asset base at the start of the year 58,925,000


Budgeted asset base at the end of the year 69,500,000


Average asset base 64,212,500


ROA (average of opening and closing assets) 16.5%


Calculate the budgeted ROA for sales outputs of 4,200,000 and 4,500,000 units.

Answer 1

Return on assets is a profitability ratio that provides how much profit a company is able to generate from its assets. In other words, ROA measures how efficient a company's management is in generating earnings from their economic resources or assets on their balance sheet. ROA is shown as a percentage, and the higher the number, the more efficient a company's management is at managing its balance sheet to generate profits.

$ROA=Net Income/Average Total Assets*100$

ROA1=4200000/64212500*100=6,54%

RQA2=4500000/64212500*100=7,00%

https://www.investopedia.com/ask/answers/031215/what-formula-calculating-return-assets-roa.asp