Question

What is one way to measure the profitability of a company? What comprises this metric?

a. Return on Assets (ROA) - Net Income / Average Total Assets
b. Gross Margin - (Revenue - Cost of Goods Sold) / Revenue
c. Earnings Before Interest and Taxes (EBIT) - Interest / Taxes
d. Operating Cash Flow - Net Income / Depreciation

Answer 1

Return on Assets (ROA) is one way to measure the profitability of a company. It is calculated by dividing net income by average total assets.

Step-by-step explanation:

One way to measure the profitability of a company is by using the Return on Assets (ROA) metric. ROA is calculated by dividing net income by average total assets. Net income represents the company's total revenue minus all expenses, including taxes. Average total assets refer to the average value of all assets owned by the company during a specific period of time.