Question: 1. The return on total assets is the focus of analysts, creditors, and other users of financial statements.
1. How is the return on total assets computed?
2. What does this important ratio reflect?
2. Return on total assets can be separated into two important components.
1. Write the formula to separate the return on total assets into its two basic components.
2. Explain how these components of the return on total assets are helpful to financial statement users for business decisions.