If the total asset turnover decreases, then the return on equity will [blank].
A)decrease
B)increase
C)not change
D)change slightly

Question

Quizplus · Accepted Answer

Return on equity is calculated by dividing net income by shareholder's equity. If the total asset turnover decreases, it means the company is generating less revenue for each dollar of assets. This will lead to a decrease in net income, which will then result in a decrease in return on equity.

If the Total Asset Turnover Decreases, Then the Return on Equity