Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

Financial Accounting

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

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Multiple Choice

Return on Assets (ROA) is calculated by dividing net income by which of the following?

Net sales

Total liabilities

Average total assets

Total equity

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Verified step by step guidance

Understand the concept of Return on Assets (ROA): ROA is a financial ratio that measures how efficiently a company uses its assets to generate profit. It is calculated by dividing net income by average total assets.

Identify the numerator in the ROA formula: The numerator is the net income, which represents the profit earned by the company during a specific period.

Identify the denominator in the ROA formula: The denominator is average total assets, which is calculated by taking the sum of the beginning and ending total assets for the period and dividing by 2.

Write the formula for ROA: ROA = Net Income / Average Total Assets. In MathML, this can be expressed as:

\frac{Net Income}{Average Total Assets}

Clarify why average total assets are used: Using average total assets accounts for changes in asset levels during the period, providing a more accurate measure of asset utilization compared to using a single point in time.