Which of the Following Statements About ROA Is True

question 23

Multiple Choice

Which of the following statements about ROA is true?

• A) ROA is the most important ratio for an equity investor.
• B) ROA refiects the risk inherent in a company.
• C) ROA is useful for determining how the company financed its assets.
• D) ROA is useful for comparing companies in different industries.

---

Definitions:

Weighted-Average Method

A cost accounting method that averages the costs of all goods available for sale during the period, regardless of when they were acquired or produced.

First-In, First-Out Method

A method of inventory valuation where the oldest inventory items are recorded as sold first, with the most recent costs remaining in inventory.

Conversion Costs

The combination of labor and manufacturing overhead costs that are incurred in turning raw materials into finished products.

First-In, First-Out Method

An inventory valuation method where the first items produced or acquired are the first ones sold or used, affecting cost of goods sold and inventory valuation.