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Need MCQ-4 answer please II. rise rise decline IV. decline a. I b. II e III d. IV e. The ratio could fall under all of the answers. 4. Which of the fo

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Answer #1

4.

Purchase of new building at year end could cause return on assets to decline when net profit margin is increasing.

Correct option is (e)

Return on assets is calculated as under :

Return on Assets = Net income/Average total assets

Hence, when assets increase, ROA decreases. Thus, for this reason, even due to increase in net profit margin, ROA will fall if assets are purchased.

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