The return on assets (ROA)model measures:
A)revenues divided by net profit multiplied by the asset turnover
B)net profit margin multiplied by the equity multiplier
C)net profit margin multiplied by the asset turnover
D)net profit divided by total assets multiplied by the asset turnover

Question

Quizplus · Accepted Answer

The return on assets (ROA) model measures the net profit margin multiplied by the asset turnover. This shows the company's profitability based on the effective use of their assets. Option A and D are incorrect because they include different components that are not part of the ROA measurement. Option B includes the equity multiplier, which is not relevant to the ROA calculation.

The Return on Assets (ROA)model Measures