Return on assets measures:

Question

Quizplus · Accepted Answer

Return on assets (ROA) measures how efficiently a company uses its assets to generate earnings. It is calculated as net income divided by average total assets. This ratio reflects the amount of profit earned for each dollar of assets invested by both stockholders and creditors. Net profit margin ratio is calculated as net income divided by total revenue, and total asset turnover is calculated as total revenue divided by average total assets. Multiplying the two ratios gives us ROA. Therefore, both choices A and B are correct, and the answer is D. Choice C refers to the core business profitability, which is not the same as ROA.

Return on Assets Measures