Question

Which of the following financial ratios can help you learn about a company's profitability?

A. Debt ratio

B. Debt to equity ratio

C. Return on assets ratio

D. Current ratio

Answer 1

C. Return on assets ratio

Step-by-step explanation:

The return on assets ratio is a profitability ratio that shows a business's ability to generate profits from its assets. The ratio communicates the management's efficiency in generating profits using the available assets. The return of assets ratio ROA is expressed as a percentage of average assets.

The formula for calculation ROA is as below.

ROA = Net income/ Average assets or ending assets x 100.

The higher the percentage, the better for a business.