Which of the following could cause return on assets to decline when net profit margin is increasing?
A) sale of investments at year-end
B) increased turnover of operating assets
C) decline in book value
D) a stock split
E) purchase of a new building at year-end

Question

Quizplus · Accepted Answer

The purchase of a new building at year-end increases total assets, which could cause the return on assets to decline even if the net profit margin is increasing, as the return on assets is calculated by dividing net income by total assets.

Which of the Following Could Cause Return on Assets to Decline