Return on total assets is the product of _____.
A) interest rates and pre-tax profits
B) the debt-equity ratio and P/E ratio
C) the after-tax profit margin and the asset turnover ratio
D) sales and fixed assets
E) None of these is correct

Question

Quizplus · Accepted Answer

Return on total assets (ROTA) is calculated by multiplying the after-tax profit margin and the asset turnover ratio. This shows the efficiency a company is generating income from its assets. Option A is incorrect because interest rates are not directly related to ROTA. Option B is incorrect because the debt-equity ratio and P/E ratio are not used in the calculation of ROTA. Option D is incorrect because sales and fixed assets do not determine ROTA.

Return on Total Assets Is the Product of _____