Net income is the best measure to use for evaluating a firm's profits on assets because it includes the effect of financing as well as the effect of operations.

Question

Quizplus · Accepted Answer

Net income alone does not account for the capital structure of a firm (debt vs. equity financing) and does not directly measure the efficiency of asset use. Return on Assets (ROA) is a better measure for evaluating a firm's profit generation from its assets, as it considers both operating and financing effects by relating net income to total assets.

Net Income Is the Best Measure to Use for Evaluating