A Retailer's Return on Assets Equals 5 Percent

question 28

Multiple Choice

A retailer's return on assets equals 5 percent.Its financial leverage is 4.What is its return on net worth?

• A)10 percent
• B)16 percent
• C)20 percent
• D)The answer cannot be determined from the information provided

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Definitions:

Operating Assets

Assets used in the day-to-day operations of a business, such as machinery, buildings, and equipment, that contribute to revenue generation.

Operating Costs

The expenses associated with the operation of a business, excluding costs associated with production.

Working Capital

The difference between a company’s current assets and current liabilities, indicating its short-term financial health and operational efficiency.

Net Present Value

A calculation used to assess the profitability of an investment, considering the present value of its future cash flows minus the initial investment.