The profitability ratio that measures an entity's ability to generate a profit from its asset investments is:
A) profit margin.
B) return on equity.
C) gross profit margin.
D) return on assets.

Question

Quizplus · Accepted Answer

Return on assets (ROA) measures the amount of profit generated by a company as a percentage of its total assets. It shows how efficiently a company is using its assets to generate profits. Therefore, ROA is the profitability ratio that measures an entity's ability to generate a profit from its asset investments. Options A, B, and C are also profitability ratios, but they measure different aspects of profitability.

The Profitability Ratio That Measures an Entity's Ability to Generate