When Determining the Rate of Return on Assets

question 41

Multiple Choice

When determining the rate of return on assets:

• A)the DuPont model breaks return on assets down into three component ratios that drive it.
• B)the DuPont model calculates the rate of return on assets as the net profit margin ratio times total asset turnover.
• C)it is important for companies to develop strategies to decrease total asset turnover.
• D)total asset turnover measures how much every sales dollar generates in profit.

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Definitions:

Net Assets

The total assets of a company minus its total liabilities, representing the company's equity value.

Book Values

The value of an asset as reported on the balance sheet, calculated as the cost of an asset minus accumulated depreciation.

Fair Values

The income from selling an asset or the cost for handling a liability in a methodically organized market deal on the scheduled assessment date.

Business Combination

The process of merging two or more companies into a single entity to achieve operational efficiencies or strategic objectives.