The numerator of the return on total assets is
A) net income
B) net income plus tax expense
C) net income plus interest expense
D) net income minus preferred dividends

Question

Quizplus · Accepted Answer

The numerator of the return on total assets is net income plus interest expense. This is because the return on total assets measures a company's ability to generate earnings from its assets before financing costs (interest expense) and taxes. Adding back interest expense to net income adjusts for the cost of debt, providing a clearer picture of the company's operational efficiency.

The Numerator of the Return on Total Assets Is