Cliff Corp. reported net income of $90,000, a profit margin of 8.7%, a debt-to-equity ratio of...

Cliff Corp. reported net income of $90,000, a profit margin of 8.7%, a debt-to-equity ratio of 0.60 and total asset turnover of 2.2. What is Cliff Corp.’s ROA?

Select one:

a. 8.70%

b. 18.92%

c. 19.14%

d. 22.12%

e. None of the above.

Expert Solution

ROA = Net Income / Total Assets

Net Income = $ 90,000

Profit margin = 8.7% = Net Income/ Sales

Sales = Net Income/ 8.7% = 90,000/ 8.7% = $ 1,034,482.76

Total Assets = Sales/ Asset turnover = 1,034,482.76/2.2 = 470,219.44

ROA = 90,000/ 470,219.44 = 19.14%

Answer is c. 19.14%

jeff jeffy answered 2 years ago

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