The Following Question Relates to PQR, Which Has the Following

question 19

Multiple Choice

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 12 per cent; return on equity (ROE) 14 per cent; and current ratio (CR) of 1.8:1. The company changed accounting methods by deciding to capitalise rather than expense a research and development outlay. This will:

• A) increase ROE, but have no effect on ROA and CR.
• B) increase ROA, ROE and CR.
• C) increase ROA and ROE but have no effect on CR.
• D) have no effect on ROA, ROE or CR.

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Definitions:

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