The Rate of Return on Assets Relates the Results of Operating

question 56

Multiple Choice

The rate of return on assets relates the results of operating performance to the investments of a firm without regard to how the firm financed those investments.The ratio is calculated as follows:

• A) \(\frac{\text {Net Income + Interest Expense Net of Income Tax Savings }}{\text {Average Total Assets }}\)
• B) \(\frac{\text { Net Income}}{\text {Average Total Assets }}\)
• C)\(\frac{\text {Net Income + Interest Expense }}{\text {Average Total Assets }}\)
• D)\(\frac{\text {Net Income + Interest Expense Net of Income Tax Savings }}{\text { Ending Total Assets}}\)
• E)\(\frac{\text {Net Income }}{\text { Ending Total Assets}}\)

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Definitions:

Face Value

The nominal or original value printed on a financial instrument like a bond, distinct from its market value.

Market Yield

The annual income return on an investment, expressed as a percentage of the market price, reflecting the current consensus on the investment's future performance.

Coupon Bond

A bond that pays the holder a fixed interest payment (coupon) periodically until the maturity date, when the principal amount is reimbursed.

Coupon Bond

A type of bond that offers the holder periodic interest payments, with the principal repaid at maturity.