BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increases
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decreases
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remains the same
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cannot be determined without additional information
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Detailed explanation-1: -If average total assets increase, but net income, net sales, and average stockholders equity remain the same, what is the impact on the return on assets ratio? a. Increases.
Detailed explanation-2: -When calculating average total assets, you can apply the formula: Average total assets = (total assets for current year) + (total assets for previous year) / 2.
Detailed explanation-3: -A company has a net income when revenues exceed expenses. This means a company has increased its assets and that revenues have exceeded the assets used to generate the revenues. A company has a net loss and a decrease in assets when expenses have exceeded revenues.
Detailed explanation-4: -Return on assets (ROA) is a financial ratio that shows the percentage of profit a company earns in relation to its overall resources. It is commonly defined as net income divided by total assets.
Detailed explanation-5: -The return on total assets ratio is calculated by dividing earnings after tax by total assets.