A company increases sales revenue.Total assets and net income are unchanged.The company's
A)net profit margin and asset turnover both rise.
B)net profit margin rises and its asset turnover falls.
C)net profit margin and asset turnover ratio both fall.
D)net profit margin falls and its asset turnover ratio rises.

Question

Quizplus · Accepted Answer

If the company increases its sales revenue without any change in total assets or net income, it means that the asset turnover ratio will increase (since sales revenue is part of the numerator), while the net profit margin will fall (since net income hasn't increased but sales revenue has).

A Company Increases Sales Revenue