Observe That a Firm's ROE Is Above the Industry Average

question 65

Multiple Choice

observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average.Which of the following statements is CORRECT?

• A)Its total assets turnover must be above the industry average.
• B)Its return on assets must equal the industry average.
• C)Its TIE ratio must be below the industry average.
• D)Its total assets turnover must be below the industry average.
• E)Its total assets turnover must equal the industry average.

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Definitions:

Doubtful Accounts

Receivable accounts that may potentially become bad debts as the likelihood of collection is uncertain.

Balance Sheet

The balance sheet is a financial statement that shows a company's financial position at a specific point in time, listing assets, liabilities, and shareholders' equity.

Allowance Method

Bases bad debt expense on an estimate of uncollectible accounts.

Bad Debt Expense

An expense reported on the income statement, representing the value of accounts receivable deemed non-collectible.