Big K Grocer’s financial statements show average shareholders’ equity of $5,103 million, net income of $700 million, and average total assets of $23,175 million.
How much is Big K Grocer’s return on assets for the year?

Question

Big K Grocer’s financial statements show average shareholders’ equity of $5,103 million, net income of $700 million, and average total assets of $23,175 million.   
 How much is Big K Grocer’s return on assets for the year?

BlackTom AI · Accepted Answer

To determine return on assets (ROA), we use the formula ROA = Net Income / Average Total Assets.

Option 1: 21.42% — This would require Net Income to be about 21.42% of average assets. Calculating 21.42% of 23,175 yields roughly 4,955, which is far from the reported net income of 700. Hence this is incorrect.

Option 2: 3.02% — This is very close to 700 / 23,175. In fact, 23,175 × 0.0302 = 699.885, which is essentially 700 when rounded to the nearest million. Therefore this percentage aligns with the given figures.

Option 3: 4.77% — If ROA were 4.77%, then net income would be about 4.77% of 23,175, which equals roughly 1,105. This is not equal to the stated net income, so this option is inaccurate.

Option 4: 21.24% — This implies net income near 23,175 × 0.2124 ≈ 4,925, far from 700. This discrepancy shows the option is incorrect.

In summary, the correct proportion of net income to average total assets is around 0.0302, i.e., 3.02%, which matches the provided numbers when performing the division.

Big K Grocer’s financial statements show average shareholders’ equity of $5,103 million, net income of $700 million, and average total assets of $23,175 million. How much is Big K Grocer’s return on assets for the year?单项选择题

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