Which of the Following Results in an Increase in the Return

question 36

Multiple Choice

Which of the following results in an increase in the return on assets ratio?

• A) A decrease in the asset turnover ratio.
• B) An increase in the net profit margin ratio.
• C)Purchasing a building by signing a long-term mortgage payable.
• D)Using cash to purchase lanD.Return on assets is net income divided by average total assets or net profit margin ratio times asset turnover ratio. An increase in the net profit margin ratio therefore increases return on assets.

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Definitions:

Salvage Value

The anticipated market price of an asset at the conclusion of its effective life.

Operating Costs

Expenses associated with the day-to-day functions of a business, excluding costs related to the production of goods.

Useful Life

The estimated time period that an asset is expected to be operational and economically useful to the owner.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculated by discounting future cash flows to their present value and subtracting the initial investment cost.