Which of the following statements is true?
A) A decrease in net income decreases both the net profit margin ratio and the asset turnover ratio.
B) An increase in average total assets results in a decrease in both the asset turnover ratio and the net profit margin ratio.
C)A decrease in average total assets results in an increase in the asset turnover ratio and a decrease in the net profit margin ratio.
D)An increase in net income increases both the net profit margin ratio and the return on assets ratio.

Question

Quizplus · Accepted Answer

An increase in net income increases the net profit margin ratio because it is calculated as net income divided by sales. It also increases the return on assets ratio, which is calculated as net income divided by average total assets.

Which of the Following Statements Is True