When the Return on Total Assets Is Greater Than the Return

question 49

True/False

When the return on total assets is greater than the return on common stockholders' equity, the management of the company has effectively used leverage.

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Definitions:

Inventory

The total amount of goods and materials held by a company intended for sale or used in production.

Service Firms

Businesses that provide intangible products or services to consumers as opposed to tangible goods.

Activity Base

A measure used as a basis for allocating costs in activity-based costing; often related to the volume of activities driving costs.

Costs

Costs represent the monetary value spent on goods, services, and efforts to achieve an objective, such as producing a product or providing a service.