A retailer that can double its asset turnover,while keeping its profit margin constant,doubles its return on assets.

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing net profit by total assets. If a retailer can double its asset turnover (revenue divided by total assets), while keeping its profit margin constant, it means that revenue has increased, but total assets have remained the same. Therefore, the calculation for ROA will result in a higher value as net profit is divided by the same amount of assets. Thus, doubling asset turnover will double the ROA.

A Retailer That Can Double Its Asset Turnover,while Keeping Its