Which of the following is the formula to compute the rate of return on total assets?
A) The formula is (Net income + interest expense)/Total assets.
B) The formula is Net income/Net sales.
C) The formula is (Net income - preferred dividends)/Number of shares of common stock outstanding.
D) The formula is (Net income - preferred dividends)/Average common stockholders' equity.

Question

Quizplus · Accepted Answer

The correct formula to compute the rate of return on total assets is (Net income + interest expense)/Total assets. This formula accounts for both the profits generated by the company and the costs of financing its assets, providing a comprehensive view of its efficiency in using its assets to generate earnings.

Which of the Following Is the Formula to Compute the Rate