Which of the following is true regarding the calculation of return on total assets?
A) the numerator of the ratio consists only of net income.
B) the denominator of the ratio consists of the balance of total assets at the end of the period under consideration.
C) the numerator of the ratio consists of net income plus interest expense times the tax rate.
D) the numerator of the ratio consists of net income plus interest expense times one minus the tax rate.

Question

Quizplus · Accepted Answer

The return on total assets is calculated by adding net income and interest expense (adjusted for tax savings) to account for the cost of debt, which is interest expense times one minus the tax rate.

Which of the Following Is True Regarding the Calculation of Return