The Return on Assets Ratio Measures

question 17

Multiple Choice

The return on assets ratio measures

• A)how effectively assets generate profits.
• B)how effectively assets generate stockholders equity.
• C)the relationship of total assets to current assets.
• D)the relationship of total assets to total liabilities.
• E)a company's ability to generate sales.

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Definitions:

Uncollectible Accounts Expense

This refers to the expense recorded by a business to cover debts that are not expected to be collected due to customers being unable to pay.

Allowance for Doubtful Accounts

A method used in accounting to estimate the portion of accounts receivable that may not be collected.

Contra Asset

An account that is used to reduce the value of a related asset, such as accumulated depreciation reducing the book value of fixed assets.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, indicating the side which increases the account.