If a fiRm Produces a 10 % Return on Assets

question 76

Multiple Choice

If a firm produces a 10 % return on assets and also a 10 % return on equity, then the firm:

• A) Has no debt of any kind.
• B) Is using its assets as efficiently as possible.
• C) Has no net working capital.
• D) Also has a current ratio of 10.
• E) Has an equity multiplier of 2.

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Definitions:

Lockbox Plan

A banking service that speeds up collection and processing of company receipts by having those payments mailed directly to a location accessible by the bank.

Collection Of Cheques

Collection of Cheques refers to the process banks undertake to collect the amount specified on a cheque from the bank upon which the cheque is drawn.

Collections Float

The time gap between when a check is deposited into a bank account and the funds are available for use.

Cash Management System

A suite of services and tools used by businesses to manage their cash flow, including collection services, disbursement services, and liquidity management.