If a Firm Decreases Its Operating Costs, All Else Constant

question 51

Multiple Choice

If a firm decreases its operating costs, all else constant, then:

• A)the profit margin increases while the equity multiplier decreases.
• B)the return on assets increases while the return on equity decreases.
• C)the total asset turnover rate decreases while the profit margin increases.
• D)both the profit margin and the equity multiplier increase.
• E)both the return on assets and the return on equity increase.

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Definitions:

Cost

The value of economic resources used or the amount of expenditure incurred to acquire or produce a good or service.

Book Value

The net value of an asset as recorded on the balance sheet, calculated by subtracting any associated depreciation or amortization from its cost.

Property

Assets or possessions owned by an individual or company, encompassing both tangible and intangible assets.