Question

Calculating ROA Matured Water Services had net income for the month of October of \(50,880. Assets as of the beginning and end of the month totaled \)362,000, and $486,000, respectively. Calculate Matured Water Services' ROA for the month of October

Short answer

ROA equals 12%.

Step-by-step solution

Explanation on ROA

Return on assets (ROA)measures the business's profitability by utilizing the total assets of the business.

Calculation of ROA

ROA is calculated as follows:

$$\begin{gathered} \mathbf{ReturnonAssets}\mathbf{=}\frac{\mathbf{NetIncome}}{\frac{\mathbf{BeginningTotalAssets}\mathbf{+}\mathbf{EndingTotalAssets}}{\mathbf{2}}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{880}}{\frac{\mathbf{\$}\mathbf{362}\mathbf{,}\mathbf{000}+\mathbf{\$}\mathbf{486}\mathbf{,}\mathbf{000}}{\mathbf{2}}} \\ \mathbf{=}\mathbf{12}\mathbf{\%} \end{gathered}$$

Thus, the return on assets is 12%.