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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