If the Total Assets of a Firm Decrease While All

question 330

Multiple Choice

If the total assets of a firm decrease while all other components of ROE remain unchanged, you would expect the firm's:

• A) ROE to increase.
• B) ROA to decrease.
• C) Equity multiplier to increase.
• D) ROE to remain unchanged.
• E) Profit margin to decrease.

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Definitions:

Non-Controlling Interest (NCI)

A financial interest in a subsidiary attributed to shareholders outside of the controlling shareholder group, reflecting their share of the entity's equity that isn’t controlled by the parent company.

Identifiable Net Assets (INA) Method

is a technique used in business combinations to value the acquired company by summing the fair values of its identifiable assets and liabilities.

Proportionate Consolidation Method

An accounting technique used for joint ventures, where an entity's share of each of the assets, liabilities, income, and expenses are combined line by line with similar items in the entity's financial statements.

Non-Controlling Interest (NCI)

It represents the equity in a subsidiary not attributable, directly or indirectly, to the parent company.