If a Firm Wishes to Retain the Same Return on Equity

question 5

Multiple Choice

If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must ____.

• A) decrease its equity multiplier
• B) increase its equity multiplier
• C) increase sales and increase assets
• D) reduce sales and increase assets

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Definitions:

Production Possibility Frontiers

A curve depicting all maximum output possibilities for two goods, given a set of inputs resources, and technology, illustrating the trade-offs in production choices.

Opportunity Cost

Forgoing possible benefits from other options by selecting a particular one.

Straight Lines

Lines in a geometric space that have the same direction throughout and no curvature.

Foreign Trade

The exchange of goods and services between countries.