A retailer can increase its return on assets by increasing its _____.
A)financial leverage
B)asset turnover
C)debt
D)cost of goods sold

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing net income by total assets. Therefore, to increase ROA, a retailer can either increase net income or decrease total assets. One way to increase net income is to increase sales, which can be achieved by increasing the asset turnover ratio. The asset turnover ratio measures how efficiently a company is using its assets to generate revenue. A higher asset turnover ratio means that the company is generating more revenue per dollar of assets, which can lead to a higher ROA. Financial leverage, debt, and cost of goods sold do not necessarily increase ROA on their own.

A Retailer Can Increase Its Return on Assets by Increasing