Which of the following transactions would increase a company's return-on-assets ratio?
A)Received cash from customers for goods sold to them on account last month.
B)Borrowed cash from a local bank.
C)Incurred expenses on account.
D)Paid cash to settle accounts payable.

Question

Quizplus · Accepted Answer

Return-on-assets ratio = Net income ÷ Total assets
Increasing net income (the numerator)and/or decreasing total assets (the denominator)increases the company's return-on-assets ratio.
Paying cash to settle accounts payable decreases assets,but has no effect on net income;this transaction increases the return-on-assets ratio.

Which of the Following Transactions Would Increase a Company's Return-On-Assets