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)

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

The group of ratios that measures a company's ability to use assets to generate sales is known as:

Asset turnover ratios

Liquidity ratios

Profitability ratios

Leverage ratios

Previous problemNext problem

Verified step by step guidance

Understand the concept of asset turnover ratios: These ratios measure how efficiently a company uses its assets to generate sales or revenue. It reflects the company's operational efficiency.

Compare asset turnover ratios with other types of financial ratios: Liquidity ratios measure a company's ability to meet short-term obligations, profitability ratios assess the company's ability to generate profit, and leverage ratios evaluate the use of debt in financing operations.

Identify the key formula for asset turnover ratio: The formula is typically expressed as \( \text{Asset Turnover Ratio} = \frac{\text{Net Sales}}{\text{Average Total Assets}} \). This formula helps calculate how much sales are generated per dollar of assets.

Analyze the purpose of asset turnover ratios: These ratios are particularly useful for understanding how effectively a company is utilizing its assets to drive sales, which is critical for operational performance evaluation.

Conclude that the correct answer is 'Asset turnover ratios' because this group of ratios specifically measures the company's ability to use assets to generate sales, aligning with the definition provided in the problem.