The return on net worth is the product of two ratios: the company's return on assets and its asset turnover ratio.

Question

Quizplus · Accepted Answer

The return on net worth, also known as return on equity (ROE), is not the product of the company's return on assets (ROA) and its asset turnover ratio. ROE is calculated by dividing net income by shareholder equity, while ROA is net income divided by total assets, and the asset turnover ratio is sales divided by total assets.

The Return on Net Worth Is the Product of Two