Which of the following statements regarding ratios is true?
A)All other things being equal,a lower debt-to-assets ratio indicates a riskier financing strategy.
B)A lower asset turnover ratio is a favorable indicator of how efficiently a company is utilizing its resources.
C)The net profit margin ratio cannot be used to indicate how well a company is controlling its expenses.
D)Ratios can be used to compare companies of different sizes.

Question

Quizplus · Accepted Answer

Ratios can be used to compare companies of different sizes by standardizing the data and making it comparable. A and B are false statements, as a lower debt-to-assets ratio indicates a less risky financing strategy, and a higher asset turnover ratio is a favorable indicator of efficiently using resources. C is also false, as the net profit margin ratio is a measure of how efficiently a company is controlling its expenses.

Which of the Following Statements Regarding Ratios Is True