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Financial & Managerial Accounting
Found in: Page 29
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Define and explain the return on assets.

Return on assets is the profitability ratio which is computed as net income divided by the average assets.

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Step by Step Solution

Step 1: Definition of return on assets

Return on assets is a profitability ratio that is very useful in evaluating, managing, and analyzing the profits of the business. It helps the management to make better decisions regarding future profits.

Step 2: Computation of return on assets

Return on assets of a company is calculated as net income divided by the average assets, and average assets are opening assets plus closing assets divided by 2.

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