[amp_mcq option1=”return on total assets” option2=”return on total equity” option3=”return on debt” option4=”return on sales” correct=”option1″]
The correct answer is A. return on total assets.
Return on total assets (ROA) is a profitability ratio that measures how profitable a company is relative to its total assets. It is calculated by dividing net income available for common stockholders by total assets.
ROA is a good measure of a company’s efficiency in using its assets to generate profits. A high ROA indicates that a company is using its assets efficiently to generate profits. A low ROA indicates that a company is not using its assets efficiently to generate profits.
ROA can be compared to industry averages to see how a company is performing relative to its peers. It can also be used to track a company’s performance over time to see if it is improving or declining.
Here is a brief explanation of each option:
- Return on total equity (ROE) is a profitability ratio that measures how profitable a company is relative to its total equity. It is calculated by dividing net income available for common stockholders by total equity.
- Return on debt (ROD) is a profitability ratio that measures how profitable a company is relative to its debt. It is calculated by dividing net income available for common stockholders by total debt.
- Return on sales (ROS) is a profitability ratio that measures how profitable a company is relative to its sales. It is calculated by dividing net income available for common stockholders by net sales.