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

Question

Quizplus · Accepted Answer

Return on assets (ROA) is calculated as net income divided by total assets, which is equal to profit margin (net income divided by total revenue) multiplied by asset turnover (total revenue divided by total assets). Therefore, option D, profit margin multiplied by asset turnover, is the correct formula for calculating ROA.

Return on Assets Equals