Look at the following summary of ABC Inc.’s accounts on December 31, 2012.
current liabilities: $25,000
total assets: $3,00,000
total liabilities: $80,000
net income (after tax): $100,000
current assets: $55,000
Calculate the return on assets.
A: 1 : 3
B: 3 : 2
C: 3 : 1
D: 1 : 2
E: 2 : 1
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An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".
Is the total assets $3,000,000 or $300,000 ?