Hi Sushma,
The ROA is usually calculated as Net Income divided by Average total assets. But in one of the questions on Wiley the answer was calculated by using as the numerator Net Income minus Interest Expense minus the tax shield related to the interest expense.
So I have the same question as yours.
Regards,
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Hassan Mokh
Accountant
Beirut
Lebanon
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Original Message:
Sent: 04-30-2021 09:07 PM
From: Sushma Agarwal
Subject: ROA ratio
Hi,
When we calculate Return on Assets, do we need to add back the interest expenses and tax shield on interest to Net income?
eg- net income + interest expenses - tax savings
Thanks,
Sushma
Sent from my iPhone