Which of the ratios listed helps to indicate the ability of a company to generate a return on its assets before considering the cost of financing those assets?
A) Current ratio
B) Profit margin
C) Quick ratio
D) Return on assets

Question

Quizplus · Accepted Answer

Return on assets (ROA) measures how efficiently a company can generate profits from its assets before considering the cost of financing those assets. It is calculated by dividing the net income by total assets. A higher ROA indicates that the company is utilizing its assets effectively to generate profits. Current ratio, profit margin, and quick ratio are useful ratios, but they do not measure the ability of a company to generate returns on assets.

Which of the Ratios Listed Helps to Indicate the Ability