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

question 103

Multiple Choice

You 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.

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Definitions:

Economic Profits

The excess of total revenue over total cost, including both explicit and implicit costs, reflecting the true profitability of a business.

Marginal-cost Pricing

A pricing strategy where the price of a product is set equal to the additional cost of producing one extra unit of output.

Productive Efficiency

A state where an economy or firm produces goods or services at the lowest possible cost, using resources in the best possible manner without waste.

Managerial Incentives

Incentives designed to motivate managers to make decisions that align with the owner's or shareholders' interests.