Question

The primary thing that this more sophisticated measure of ROA better captures that the simpler version, defined as ROA* = Net Income / Total Assets, is:

Answer 1

The question is incomplete, the options are missing. The options are the following:

a) It better measures how we did with our assets, irrespective of the mix of debt and equity used to finance those assets

b) It adjusts for non-recurring items in net income

c) It takes out non-cash charges that are in net income

d) It gives a higher number, so it makes the firm look better

And the correct answer is the option A: It better measures how we did with our assets, irrespective of the mix of debt and equity used to finance those assets.

Step-by-step explanation:

To begin with, the term of "Return on Assets" refers to the measure that is used in the companies and in the financial world in order to understand how the company is doing with the relationship between the net income and the assets so in that way the company can be more certain about what percentage of the assets are more profitable in getting revenue back after the sales.