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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

a. How does the return on total assets differ from the return on stockholders’ equity?

b. Which ratio is normally higher? Why?

a.

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the capabilities, profitability, and overall performance of a company.

To determine:  The difference between return on total assets and return on stockholders’ equity.

Explanation

When return on total assets are considered, interest expense are added to the net income and further these are divided by average total assets. This measures profitability of the total assets towards financing of the assets...

b.

To determine

To find out: Ratio that is higher.

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