answersLogoWhite

0


Best Answer

If you look at what Return on Assets is comprised of, Net Profit Margin and the Total Asset Turnover, if the firm is having a very slow turnover, the ROA will be declining if the turnover is greater in magnitude to the NPM.

User Avatar

Wiki User

16y ago
This answer is:
User Avatar

Add your answer:

Earn +20 pts
Q: Explain how return on assets decline given an increase in net profit margin?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Related questions

How to maintain company's return on shareholder's equity with a decline in a net profit margin?

increase the company's total assets.


Which two ratio are used in DuPont system to create return on assets?

Return on Assets = Profit Margin X Asset Turnover


What is it called when Sales can decline before losses are incurred?

margin of safety


How does depreciation affect the profit margin?

Depreciation lowers the value of your assets. This in turn will lower your overall profit margin as well as your net worth.


What happens to the text area when a margin is increased?

When margin is increased, the area for text might increase or decrease. It depends on margin area.


Explain why buying on margin can be a devastating thing?

Buying on margin can deplete a person's portfolio and can be a devastating thing.


What is the profit margin if the asset turnover ratio is 3 time and the return on asset is .1?

Return on Assets = Profit Margin on Sales x Asset Turnover .1 = Profit Margin on Sales x 3 .033 = Profit Margin on Sales


What happens when sales increase and gross profit margin decrease?

A simple answer - expenses increased somewhere within the business. If sales increase, then so should the profit margin theoretically. If the profit margin decreases, then expenses increased.


A firm can increase its operating return on assets how?

A firm can increase its Operating Return on Assets (OROA) through: (1) Operation Management: Increasing operating profit margin by efficiently managing costs like marketing expenses, general selling and administrative expenses (2) Asset Management: Increasing total asset turnover by selling inventories and collecting accounts receivables as quickly as possible


How an increase in unit selling prices might affect contribution margin?

Increase in unit selling price while other costs remains same will increase the contribution margin and reduce the breakeven point.


How to reduce Margin of error?

Increase sample size.


What is the asset turnover ratio if the profit margin is 5 percent and the return on assets is 13.5 percent?

ROA = Net Profit Margin * Asset Turnover Asset Turnover = ROA/Profit Margin = 13.5/5 = 2.7%