Chicago Ltd is a large retailer of hardware equipment that sells its products through a network of suburban stores. Shown below are the calculation of some of its key ratios for 2019 and 2018. Which of the above ratios explains why ROA has decreased from 2018 to 2019?

Question

Chicago Ltd is a large retailer of hardware equipment that sells its products through a network of suburban stores. Shown below are the calculation of some of its key ratios for 2019 and 2018.  Which of the above ratios explains why ROA has decreased from 2018 to 2019?

Quizplus · Accepted Answer

The decrease in ROA from 2018 to 2019 can be attributed to a decrease in Asset Turnover. Despite an increase in Profit Margin, the company was not able to generate as much revenue from its assets in 2019 as it did in 2018.

Chicago Ltd Is a Large Retailer of Hardware Equipment That