GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What does the return on total assets take into account?
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Shareholder’s fund
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Income after taxation
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Total outside liability
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Income before tax and interest on fixed liability
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Explanation:
Detailed explanation-1: -Pretax return on assets ratio is computed by dividing a company’s yearly pre-tax earnings by the company’s total assets. The ratio indicates the profitability of the company compared to its total assets. A high pretax margin is a positive sign for the company.
Detailed explanation-2: -The rate of return on equity is equal to the income after interest and taxes divided by equity. Financial risk is equal to the total farm risk times the business risk. Increasing a firm’s assets can increase profitability. The rate of return on assets is equal to the income after interest and taxes divided by equity.
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