Which of the Following Would Best Explain a Situation Where

question 64

Multiple Choice

Which of the following would best explain a situation where the ratio of net income/total equity of a firm is higher than the industry average, while the ratio of net income/total assets is lower than the industry average?

• A) The firm's net profit margin is higher than the industry average.
• B) The firm's asset turnover is higher than the industry average.
• C) The firm's equity multiplier must be lower than the industry average.
• D) The firm's debt ratio is higher than the industry average.
• E) None of the options are correct.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often receiving dividends before common shareholders.

Cumulative Voting

A voting system that allows shareholders to concentrate their vote allocation among one or more candidates, enhancing minority shareholders' ability to elect a director.

Straight Voting

A corporate voting procedure in which shareholders may cast all votes for a single candidate for the board.

Cumulative Voting

A voting system that allows shareholders to allocate all their votes to one candidate or distribute them among several candidates, often used in corporate board elections to strengthen the voting power of minority shareholders.