Podcast
Questions and Answers
What does a higher return on assets value indicate about a business?
What does a higher return on assets value indicate about a business?
- That it is more profitable and efficient (correct)
- That it is using assets more intensively
- That it is less profitable and efficient
- That it is operating in a different industry
Why should ROA not be compared across industries?
Why should ROA not be compared across industries?
- Because companies in different industries use assets differently (correct)
- Because companies in different industries have different profit margins
- Because companies in different industries have different management structures
- Because companies in different industries have different market capitalizations
What can be inferred about a company with a return on assets of 3%?
What can be inferred about a company with a return on assets of 3%?
- That it is using assets more efficiently than its competitors
- That it is operating in a highly profitable industry
- That it is an asset-light company
- That it is an asset-intensive company (correct)
What is an example of an asset-intensive company?
What is an example of an asset-intensive company?
What is the general rule for determining an asset-light business based on ROA?
What is the general rule for determining an asset-light business based on ROA?
Why is ROA useful for comparing companies within an industry?
Why is ROA useful for comparing companies within an industry?
What does a high net profit margin indicate about a company's performance?
What does a high net profit margin indicate about a company's performance?
What is the formula to calculate net profit when given the net profit margin and revenue?
What is the formula to calculate net profit when given the net profit margin and revenue?
What does the return on assets (ROA) measure?
What does the return on assets (ROA) measure?
Why is operating income used instead of income after tax when calculating ROA?
Why is operating income used instead of income after tax when calculating ROA?
What is the purpose of comparing ROA across industries?
What is the purpose of comparing ROA across industries?
What is the benefit of efficient asset utilization?
What is the benefit of efficient asset utilization?
What is the formula for calculating ROA?
What is the formula for calculating ROA?
If a company has a ROA of 15%, what does it indicate?
If a company has a ROA of 15%, what does it indicate?
What is the main purpose of using ROA in profitability analysis?
What is the main purpose of using ROA in profitability analysis?
Which of the following industries is likely to have a lower ROA?
Which of the following industries is likely to have a lower ROA?
What does a ROA of 3% indicate about a company's performance?
What does a ROA of 3% indicate about a company's performance?
What is the general guideline for classifying a company as asset-intensive or asset-light based on its ROA?
What is the general guideline for classifying a company as asset-intensive or asset-light based on its ROA?
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