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:

Bankers' Acceptances

Short-term debt instruments issued by a company that is guaranteed by a commercial bank.

Eurodollars

Deposits held in U.S. dollars at banks outside the United States, often used in international lending.

Repos

Short for repurchase agreements, a form of short-term borrowing for dealers in government securities.

Federal Funds

Funds in a bank’s reserve account at the Federal Reserve Bank.