Asked by Bryan Cakir on Jul 12, 2024
Verified
The return on assets ratio is calculated by dividing operating income by average total assets.
Return on Assets Ratio
An indicator of how profitable a company is relative to its total assets, measuring the efficiency of asset use.
Operating Income
The income produced from the normal operations of a company, subtracting operating expenses from gross profit.
Average Total Assets
A measure used to evaluate a company's efficiency and profitability, calculated by averaging the total assets at the beginning and end of an accounting period.
- Comprehend the influence of the net profit margin ratio and the total asset turnover ratio on the return on assets.
Verified Answer
RM
Roxanne MojicaJul 18, 2024
Final Answer :
False
Explanation :
The return on assets (ROA) ratio is calculated by dividing net income by average total assets, not operating income.
Learning Objectives
- Comprehend the influence of the net profit margin ratio and the total asset turnover ratio on the return on assets.