Return on assets equals:
A)Gross profit ratio x Inventory turnover.
B)Profit margin x Inventory turnover.
C)Gross profit ratio x Asset turnover.
D)Profit margin x Asset turnover.

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by multiplying the profit margin (net income divided by total revenue) by the asset turnover ratio (total revenue divided by average total assets). Therefore, the correct formula for ROA is D) Profit margin x Asset turnover.

Return on Assets Equals