If a Firm Produces a 10 % Return on Assets

question 307

Multiple Choice

If a firm produces a 10 % return on assets and also a 10 % return on equity, then the firm:

• A) Has no debt of any kind.
• B) Is using its assets as efficiently as possible.
• C) Has no net working capital.
• D) Also has a current ratio of 10.
• E) Has an equity multiplier of 2.

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Definitions:

Electromotive Force

A difference in potential that drives electric current from one point to another, measured in volts.

Voltage

The electrical potential difference between two points in a circuit, driving the flow of current.

Horsepower

A measure of power for electric and mechanical devices.

Electrical Power

The rate at which electrical energy is transferred by an electric circuit, typically measured in watts (W).