Question

Calculate the return on assets managed (ROAM) of a branch whose total sales are $3,000,000, total assets are $1,500,000, gross margin is $500,000, and branch expenses are $200,000.

	A.	5.0%
	B.	16.7%
	C.	10.0%
	D.	20.0%

Answer 1

ROAM is a measure of profits as a result of the assets handled. It is calculated as below:

ROAM= Net Income/ Total Assets

Here, the Net Income is not given. It is calculated using Gross Margin as below,

We know that,

Gross Margin= Revenue - Cost of Goods Sold

500,000 = Revenue - 3000,000

Revenue= $3,500,000

Therefore Net Income = Revenue- Expenses

= $3,500,000 - $200,000

= $3,300,000

.

Thus, ROAM = Net Income/ Total Assets * 100

= 3,300,000/ 1,500,000

= 20%

Thus, the correct answer is D. 20%