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    Question

    Assuming no change in other variables, which of the

    following would decrease Return on Assets?
    A a decrease in tax rate Correct Answer Incorrect Answer
    B a decrease in interest expense Correct Answer Incorrect Answer
    C an increase in average assets Correct Answer Incorrect Answer
    D an increase in net income Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Return on assets = Net Income/Average total assets So, an increase in average assets, keeping other variables unchanged, will decrease the overall ratio. Rest of the choices will actually increase the said ratio.

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