For most profitable companies,the rate earned on total assets will be less than:
A)the rate earned on stockholders' equity.
B)the rate earned on total liabilities and stockholders' equity.
C)the rate earned on sales.
D)cannot be determined without more information.

Question

Quizplus · Accepted Answer

The rate earned on total assets is the return on investment for both stockholders and creditors. The rate earned on stockholders' equity is the return on investment for only the stockholders. Since stockholders typically expect a higher rate of return than creditors, the rate earned on total assets is usually lower than the rate earned on stockholders' equity.

For Most Profitable Companies,the Rate Earned on Total Assets Will