Which of the following results in an increase in the return on assets ratio?
A) A decrease in the asset turnover ratio.
B) An increase in the net profit margin ratio.
C)Purchasing a building by signing a long-term mortgage payable.
D)Using cash to purchase lanD.Return on assets is net income divided by average total assets or net profit margin ratio times asset turnover ratio. An increase in the net profit margin ratio therefore increases return on assets.

Question

Quizplus · Accepted Answer

An increase in the net profit margin ratio increases return on assets as the numerator (net income) increases while the denominator (average total assets) remains the same. The other choices either decrease the asset turnover ratio (A) or increase liabilities without a corresponding increase in assets (C and D), which decreases the return on assets ratio.

Which of the Following Results in an Increase in the Return