Ratios: Profit Margin x Asset Turnover = Return On Assets definitions Flashcards
Ratios: Profit Margin x Asset Turnover = Return On Assets definitions
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Return on Assets Indicator of how much income is generated for each dollar invested in total assets, reflecting both profitability and efficiency. Profit Margin Ratio showing how much net income is earned from each dollar of sales, highlighting profitability after all expenses. Total Asset Turnover Measure of how efficiently assets are used to generate sales, calculated as sales per dollar of total assets. Net Income Final profit remaining after deducting all costs, expenses, and taxes from total revenue on the income statement. Net Sales Total revenue from sales after subtracting returns, allowances, and discounts, representing actual sales earned. Average Total Assets Mean value of a company's total assets over a period, used as the denominator in ROA calculations. Profitability Ability of a company to generate earnings relative to sales, assets, or equity, often assessed by profit margin. Efficiency Extent to which a company utilizes its assets to produce sales, often evaluated using asset turnover ratios. Net Loss Situation where total expenses exceed total revenues, resulting in a negative net income for the period. Income Statement Financial report summarizing revenues, expenses, and profits or losses over a specific period. Cost of Goods Sold Direct costs attributable to the production of goods sold by a company, deducted from sales to determine gross profit. Operating Expenses Costs incurred in the normal course of business, excluding cost of goods sold, such as salaries and rent.
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