Category

Prior year

Current year

Accounts payable

41,400

45,000

Accounts receivable

115,200

122,400

Accruals

16,200

13,500

Additional paid in capital

200,000

216,660

Cash

???

???

Common Stock @ par value

37,600

42,000

COGS

131,400

179,115.00

Depreciation expense

21,600

23,357.00

Interest expense

16,200

16,555.00

Inventories

111,600

115,200

Long-term debt

135,000

137,241.00

Net fixed assets

379,561.00

399,600

Notes payable

59,400

64,800

Operating expenses (excl. depr.)

50,400

67,162.00

Retained earnings

122,400

136,800

Sales

255,600

336,874.00

Taxes

9,900

19,374.00

What is the current year's return on assets (ROA)?

To calculate the current year's Return on Assets (ROA), we use the formula:

\[
\text{ROA} = \frac{\text{Net Income}}{\text{Average Total Assets}}
\]

### Step 1: Calculate Net Income
To find the Net Income, we use the following relationship:
\[
\text{Net Income} = \text{Sales} - \text{COGS} - \text{Operating Expenses} - \text{Depreciation Expense} - \text{Interest Expense} - \text{Taxes}
\]

From the given data for the current year:
- Sales = \$336,874
- COGS = \$179,115
- Operating Expenses (excluding depreciation) = \$67,162
- Depreciation Expense = \$23,357
- Interest Expense = \$16,555
- Taxes = \$19,374

Now, subtracting these values:
\[
\text{Net Income} = 336,874 - 179,115 - 67,162 - 23,357 - 16,555 - 19,374
\]
\[
\text{Net Income} = 31,311
\]

### Step 2: Calculate Average Total Assets
To find the average total assets, we need the values for Total Assets from both the prior and current years. The Total Assets can be approximated as:

\[
\text{Total Assets} = \text{Cash} + \text{Accounts Receivable} + \text{Inventories} + \text{Net Fixed Assets}
\]

However, the value for Cash is missing in both years, so we will approximate the Total Assets using available information:

For the current year:
- Accounts Receivable = \$122,400
- Inventories = \$115,200
- Net Fixed Assets = \$399,600

Thus, for the current year (excluding Cash):
\[
\text{Total Assets (current)} = 122,400 + 115,200 + 399,600 = 637,200
\]

For the prior year:
- Accounts Receivable = \$115,200
- Inventories = \$111,600
- Net Fixed Assets = \$379,561

Thus, for the prior year (excluding Cash):
\[
\text{Total Assets (prior)} = 115,200 + 111,600 + 379,561 = 606,361
\]

Now, we calculate the **Average Total Assets**:
\[
\text{Average Total Assets} = \frac{637,200 + 606,361}{2} = 621,781
\]

### Step 3: Calculate ROA
Now that we have both the Net Income and Average Total Assets:
\[
\text{ROA} = \frac{31,311}{621,781} \times 100 = 5.03\%
\]

Thus, the current year's Return on Assets (ROA) is approximately **5.03%**.

Would you like more details or further clarifications?

Here are 5 related questions:
1. How would the ROA change if we had the Cash values?
2. What impact does depreciation have on ROA?
3. Can ROA be improved without increasing net income?
4. How does ROA compare with other profitability metrics like Return on Equity (ROE)?
5. What is considered a good ROA for a company in this industry?

**Tip:** When calculating ROA, it's helpful to ensure all asset values are accounted for, including cash, to get the most accurate measurement.

What is the current year's return on assets (ROA)?

Learn how to calculate the current year's Return on Assets (ROA) using financial data, including net income and average total assets. This solution involves key financial concepts like sales, COGS, and depreciation, and is suitable for finance students at the undergraduate level.

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