Which of the Following Is the Correct Formula for Calculating

question 3

Multiple Choice

Which of the following is the correct formula for calculating rate of return on total assets?

• A)Rate of return on total assets = (Net income + Interest expense)/ Average total assets
• B)Rate of return on total assets = (Net income - Interest expense)/ Average total asset.
• C)Rate of return on total assets = (Net income - Interest expense)/ Total assets
• D)Rate of return on total assets = Total equity / Total assets

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Definitions:

Long-Term Solvency

The ability of an organization or business to meet its long-term financial obligations and continue operations into the future.

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.

Profitability

The ability of a business to earn a profit, which occurs when the revenues generated exceed the costs and expenses incurred in operating the business.

Financial Indicators

Financial indicators are quantitative measures that provide insights into the financial health, performance, and stability of an organization or business.