Which of the following is the best measure of performance that is independent of the way an entity is financed?
A)Gross margin percentage
B)Profit margin
C)Return on equity
D)Return on assets

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated as net income divided by total assets, and it measures how efficiently a company is using its assets to generate profits. This measure is independent of the way an entity is financed, as it focuses solely on the performance of the company's assets. In contrast, gross margin percentage and profit margin are affected by financing decisions such as interest rates, and return on equity is affected by the company's capital structure.

Which of the Following Is the Best Measure of Performance