Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 9 - Reporting and Analyzing Long-Lived Assets - Questions: 23

Answer

As we know the return on asset is computed as given below: Net Income Return on Assets ratio = -- --X 100 Average Total Assets By introducing a new product line, there will be increase in net income, and the Total Assets will remain unchanged.

Work Step by Step

This will improve the Return on Asset ratio. However, if the company is required to increase the assets by putting additional production facilities (like machinery), the new ratio may improve or decrease the ratio, will depend on the Capital expenditure incurred and the net income generated
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