The Following Question Relates to PQR,which Has the Following Ratios

question 16

Multiple Choice

The following question relates to PQR,which has the following ratios: return on assets, (ROA) 10 per cent;return on equity (ROE) 12 per cent;and current ratio (CR) of 1.8:1.
-Additional credit sales of $2 million (cost price $1.5 million) are made.This transaction will:

• A) increase ROA,ROE and CR.
• B) increase ROA and ROE but not CR.
• C) increase ROA and CR but not ROE.
• D) increase ROA,increase ROE and decrease CR.

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Definitions:

Fixed Element

A cost that does not change in total with changes in the volume of activity, remaining constant regardless of changes in levels of output or sales.

Power Costs

The expenses associated with the electricity used by a business for its operations.

Operating Departments

Units or divisions within an organization that are directly involved in its primary revenue-generating activities.

Transfer Price

The price charged for goods or services transferred among divisions or subsidiaries within the same company.