A Firm with a Substandard Return on Total Assets Can

question 5

Multiple Choice

A firm with a substandard return on total assets can improve its return on equity, all else remainingthe same, by

• A) decreasing its debt ratio.
• B) increasing its total asset turnover.
• C) increasing its debt ratio.
• D) decreasing its total asset turnover.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, often referred to as the bottom line.

Return on Equity

A financial ratio that measures the ability of a firm to generate profits from its shareholders' equity.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Shareholders' Equity

The residual interest in the assets of a company after deducting its liabilities; also referred to as stockholders' equity.