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    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.
    A 13.33% – Good return on asset base Correct Answer Incorrect Answer
    B 12% – Indicates average asset utilization Correct Answer Incorrect Answer
    C 20% – Highly efficient firm Correct Answer Incorrect Answer
    D 8.33% – Low profitability Correct Answer Incorrect Answer
    E 10% – Optimal performance Correct Answer Incorrect Answer

    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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