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:

Historical Data

Data from past periods, used for analysis, forecasting, or research to understand trends, patterns, or outcomes.

Mature Production Process

Indicates a manufacturing or production process that has reached a stage of optimization and efficiency through experience and adaptation.

Standard Costing System

An accounting system that assigns fixed costs to products based on standard assumptions about the production process.

Variance Accounts

Accounts used in managerial accounting to record the differences between actual costs and standard (budgeted) costs.