Answer:
True
Step-by-step explanation:
Return on assets (ROA) is she valuable measure in assessing the effectiveness of company management in utilizing company capital. It is calculated
ROA=
Total Assets/
Net Income
where:
Total Assets=Shareholder Equity+Liabilities
Return on assets is closely related to return on equity as they are both almost used for same purpose which is measuring management's effectiveness in capital utilization. Return on equity differs from return on assets by the inclusion or exclusion of the debt factor in calculating them.
The relationship between ROA and ROE is demonstrated in DuPont formula which is given
ROE=profit margin*asset turnover*shareholder equity