In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.

Name: In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.
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Interest expense is not subtracted from net income when calculating the return on total assets; instead, net income is used as is, or sometimes operating income is used, to reflect the earnings generated from assets.

In Computing the Rate Earned on Total Assets, Interest Expense