Return on assets is most closely related to
A) profit margin and debt to assets ratio.
B) profit margin and asset turnover.
C) times interest earned and debt to stockholders' equity.
D) profit margin and free cash flow.

Question

Quizplus · Accepted Answer

Return on assets (ROA) measures how efficiently a company is using its assets to generate earnings. It is calculated by dividing net income by total assets. Profit margin measures the percentage of sales that turn into profit, while asset turnover measures how efficiently a company is using its assets to generate revenue. Therefore, ROA is most closely related to profit margin and asset turnover.

Return on Assets Is Most Closely Related to