Question
A company's financial statements show the following:
• Net Income: ₹40 lakh • Interest Expense: ₹10 lakh • Tax Rate: 25% • Total Assets: ₹300 lakh • Current Liabilities: ₹50 lakh Calculate the Return on Assets (ROA) and interpret the result.Solution
ROA = Net Income / Total Assets = 40 / 300 = 13.33% This is a healthy ROA, especially in asset-heavy industries like manufacturing or infrastructure, showing efficient use of resources.
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