Return on assets is calculated as:
A)Net Income divided by total assets.
B)Net Income divided by average total assets.
C)Net Income divided by ending total assets.
D)Ending total assets divided by net income.

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated by dividing net income by average total assets, as it gives a better representation of the company's usage of assets over time. Option A ignores the timing of asset acquisitions, while option C only considers the assets at the end of the period. Option D is not a correct formula for calculating ROA.

Return on Assets Is Calculated As