The Following Information Is Provided for Nguyen Company and Northwest

question 228

Multiple Choice

The following information is provided for Nguyen Company and Northwest Corporation. If Nguyen and Northwest are in the same industry and the industry average for return on assets is equal to 30%, which of the following statements is true?

• A) Nguyen is more profitable than the average company in its industry.
• B) Northwest is more profitable than Nguyen.
• C) Both Nguyen and Northwest are more profitable than the average company in their industry.
• D) Nguyen is more profitable than Northwest.

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Definitions:

Required Reserve Ratio

The fraction of deposits that banks are required to hold in reserve and not lend out, determined by the central bank.

Interest Rates

The cost of borrowing money or the return on investing, typically expressed as a percentage of the principal, and set by central banks or determined by the market.

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors, or internal controls.

Actual Reserves

The total amount of funds that a bank has on deposit at the Federal Reserve, plus any cash physically held by the bank.