You Observe That a Firm's ROE Is Above the Industry

question 69

Multiple Choice

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average.Which of the following statements is CORRECT?

• A) Its total assets turnover must equal the industry average.
• B) Its total assets turnover must be above the industry average.
• C) Its return on assets must equal the industry average.
• D) Its TIE ratio must be below the industry average.
• E) Its total assets turnover must be below the industry average.

---

Definitions:

Own Stock

Refers to the possession of shares in a company, indicating partial ownership.

Corporate Bonds

Debt securities issued by corporations to raise capital, with promise to repay the principal amount along with specified interest rates over a period.

Real Return

The return on an investment after adjusting for inflation, reflecting the actual purchasing power gained or lost.

Inflation

The speed at which the overall price level for goods and services increases, leading to a decrease in buying power.