MAA103 Study Guide - Final Guide: Cash Flow Statement, Profit Margin, Management Accounting
26 Jul 2018
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Maa103 study guides: briefly discuss the behaviour assumptions relating to variable costs and fixed costs when conducting cvp analysis. Variable costs are assumed to change directly proportional to the level of volume. The return on assets is an attempt to measure the rate of return earned by management through operating activities. The ratio is useful in measuring management"s efficiency in using the firm"s assets to produce profits. The declining ratio calculated from 2014 to 2015 suggests that the company is generating less profit per dollar of assets. The return on assets does not measure the return earned by management on the funds contributed by the ordinary shareholders. The return to shareholders might be greater or less than the return on total assets because of the firm"s use of gearing, or leverage. The return on shareholders" equity measures what return shareholders receive on the funds they have invested in the organisation.
