Which of the following would result in lower return on assets for Katz if all other entries in their selected financial data were held constant?
Understand the Problem
The question is asking what factors might lead to a decrease in the return on assets (ROA) for the company Katz, assuming that all other financial data remains unchanged. This involves analyzing financial metrics and considering how changes to certain entries can impact ROA.
Answer
A reduction in earnings before interest and taxes.
A reduction in earnings before interest and taxes would result in a lower return on assets for Katz.
Answer for screen readers
A reduction in earnings before interest and taxes would result in a lower return on assets for Katz.
More Information
Return on assets (ROA) is calculated as net income divided by average total assets. A reduction in earnings before interest and taxes typically leads to lower net income, provided other factors remain constant, thus decreasing ROA.
Tips
A common mistake is confusing ROA with metrics relating to asset turnover or debt, which can mislead when considering ROA changes solely due to income fluctuations.
Sources
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