The rate of return on assets relates the results of operating performance to the investments of a firm without regard to how the firm financed those investments.The ratio is calculated as follows:
A) $\frac{\text {Net Income + Interest Expense Net of Income Tax Savings }}{\text {Average Total Assets }}$
B) $\frac{\text { Net Income}}{\text {Average Total Assets }}$
C)$\frac{\text {Net Income + Interest Expense }}{\text {Average Total Assets }}$
D)$\frac{\text {Net Income + Interest Expense Net of Income Tax Savings }}{\text { Ending Total Assets}}$
E)$\frac{\text {Net Income }}{\text { Ending Total Assets}}$

Question

Quizplus · Accepted Answer

The correct formula for the rate of return on assets includes both Net Income and Interest Expense net of income tax savings, divided by Average Total Assets, to account for the performance over a period rather than a single point in time.

The Rate of Return on Assets Relates the Results of Operating