Return on total assets can be separated into profit margin and total asset turnover.

Question

Quizplus · Accepted Answer

Return on total assets (ROA) is calculated by dividing net income by total assets. This can also be expressed as a product of profit margin and total asset turnover. Profit margin is calculated by dividing net income by total revenue, while total asset turnover is calculated by dividing total revenue by total assets. Therefore, ROA can be separated into profit margin and total asset turnover.

Return on Total Assets Can Be Separated into Profit Margin