Return on net operating assets is a better measure of operating performance than return on equity, as it is independent of the form of financing.

Question

Quizplus · Accepted Answer

Return on net operating assets (RNOA) measures a company's operating efficiency and profitability, independent of its financing structure. Return on equity (ROE) includes both operating profits and financial leverage, which can be affected by the amount of debt financing used. Therefore, RNOA is a better measure of operating performance.

Return on Net Operating Assets Is a Better Measure of Operating