Return on assets is deﬁned as:
A) Sales divided by net ﬁxed assets.
B) EBIT divided by net ﬁxed assets.
C) Net income divided by net ﬁxed assets.
D) EBIT divided by total assets.
E) Net income divided by total assets.

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing net income by total assets. Therefore, option E is the correct choice. Option A is incorrect as it calculates asset turnover ratio, not ROA. Option B is incorrect because it calculates return on investment (ROI) using earnings before interest and taxes (EBIT). Option C is incorrect because it uses only fixed assets instead of total assets. Option D is incorrect as it also uses EBIT instead of net income as the numerator.

Return on Assets Is Deﬁned As