The rate of return on total assets is computed by dividing
A) Net income by ending total assets.
B) Net sales by average total assets.
C) Net sales by ending total assets.
D) Net income by average total assets.

Question

Quizplus · Accepted Answer

The rate of return on total assets is a measure of a company's profitability in relation to its assets. It is computed by dividing net income by total assets. Using average total assets would give a more accurate measure of the company's profitability over a period of time, rather than just at the end of the period. Therefore, the correct formula is net income divided by average total assets. Choice D is the only option that correctly uses average total assets in the calculation.

The Rate of Return on Total Assets Is Computed by Dividing