Which of the following results in an increase in the return on assets ratio?
A)A decrease in the total asset turnover ratio.
B)An increase in the net profit margin ratio.
C)Purchasing a building by signing a long-term mortgage payable.
D)Using cash to purchase lanD.Return on assets is net income divided by average total assets or net profit margin ratio times total asset turnover ratio.An increase in the net profit margin ratio therefore increases return on assets.

Question

Quizplus · Accepted Answer

An increase in the net profit margin ratio (which is the ratio of net income to total revenue) will lead to an increase in the return on assets ratio. This is because the numerator (net income) will increase while the denominator (total assets) stays the same, leading to a higher ratio. The other choices (A, C, and D) may have an impact on other financial ratios, but not on the return on assets ratio.

Which of the Following Results in an Increase in the Return