Which of the following transactions results in a decrease in the return on assets ratio?
A)Increasing the sales price of the products sold.
B)An increase in the net profit margin ratio.
C)Purchasing land by signing a long-term note payable.
D)Collecting cash from an account receivable.

Question

Quizplus · Accepted Answer

Purchasing land by signing a long-term note payable will increase the company's assets and liabilities without causing an immediate increase in revenue. This will lower the return on assets ratio, which is calculated by dividing net income by total assets. The other options such as increasing the sales price or collecting cash from accounts receivable will not directly affect the return on assets ratio. An increase in net profit margin ratio may increase the return on assets ratio but it is not specified in the given options.

Which of the Following Transactions Results in a Decrease in the Return