A firm has a return on equity of 20% and a total asset turnover of 4. Assuming a debt ratio of 50% and sales of $1,000,000, calculate net income.
A) $25,000
B) $50,000
C) $75,000
D) $100,000
An increase in the current ratio would indicate an increase in
A) leverage.
B) liquidity.
C) return on investment.
D) operating income.
Which of the following is NOT a component of return on assets (ROA)?
A) Total assets
B) Cost of goods sold
C) Sales
D) Leverage
________ indicates management's effectiveness in managing the firm's income statement.
A) Gross profit margin
B) Operating profit margin
C) Net profit margin
D) Return on assets
Holding all other variables constant, which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in
A) inventory.
B) long-term debt.
C) accounts receivable.
D) accounts payable.
Which of the following will increase return on equity?
A) An increase in sales with a proportionate increase in costs and expenses
B) An increase in sales relative to the asset base
C) A decrease in leverage
D) Both A and C
Which of the following is NOT a driving force of the operating profit margin?
A) The average selling price for each product
B) The ability to control all of the firm's expenses
C) The ability to control general and administrative expenses
D) The number of units of product sold
