When Considering the Difference Between Return on Net Operating Assets

question 73

Multiple Choice

When considering the difference between return on net operating assets (RNOA) and return on common shareholders' equity (ROCE) , which of the following statements is incorrect?

• A)Preferred dividends are deducted from the numerator when calculating ROCE but not when calculating RNOA.
• B)RNOA is a pre-interest measure but ROCE is not.
• C)RNOA is a post-interest measure but ROCE is not.
• D)RNOA is independent of the form of financing but ROCE is not.

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Definitions:

Plant Assets

Fixed, tangible assets used in the operation of a business, such as machinery, buildings, and equipment, that have a useful life of more than one year.

Land Improvements

Enhancements made to land, such as landscaping, driveways, fences, and sidewalks, that increase the property's value.

Subdivisions

In real estate, this refers to the act of dividing land into pieces that are easier to sell or otherwise develop.

Cash Discount

A reduction in the price paid for goods or services offered to customers as an incentive for early payment.