Firm ABC and Firm XYZ Both Have ROAs of 12%;

question 67

Multiple Choice

Firm ABC and Firm XYZ both have ROAs of 12%; however, Firm ABC has a much higher ROE than Firm XYZ. Which of the following do we know to be true? Relative to Firm ABC, Firm XYZ has a lower:

• A) debt ratio.
• B) total asset turnover ratio.
• C) current ratio.
• D) net profit margin.

---

Definitions:

Circular-flow Model

An economic model illustrating the movement of resources and money between producers and consumers within an economy, showcasing the interconnectedness of businesses, households, and the government.

Entrepreneurial Ability

The skills and qualities that enable an individual to conceive, launch, and manage a new business venture successfully.

Physical Capital

The stock of tangible, man-made objects that contribute to production processes, such as machinery, buildings, and tools.

Bulldozers

Heavy machinery equipment used for moving, digging, and clearing large pieces of land.